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Author: 


Vanderlip,  Frank  Arthur 


Title: 

The  allied  debt  to  the 
United  States 

Place: 

Boston 

Date: 

1922 


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Vanderlip,  Frank  Arthiir,   1864-1937. 

The  allied  debt  to  the  Itoited  States;  an 
effective  plan  for  its  payment.     Address  be- 
fore the  Economic  Club  of  New  York,   November 
28th,   1921.     Boston,  National  Economic  League, 
1922. 

43  p.      (The  Consensus,   vol.  VII,  no.  2) 

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Vol.  VII. 


No,  2 


OFTIOIAL  OBOAS  OF 
THS  NATIONAL  BOOKOMIO  LBAGUX 


The  Allied  Debt  to  the 
United  States 


An  Effective  Plan  For  Its  Payment 


AddreM  hj 


Mr.  Frank  A.  Vanderlip 


Before  The  Economic  Chab  of  New  York,  November  28th,  1921 

HON.  GEORGE  W.  WICKERSHAM  "^ 

prcndiog 


ISSUED  FEBRUARY   1922 


PUaLISBXD  QVAR'TERX.Y  BY 

THE   NATIONAL  ECONOMIC  LEAGUE 
6  BEACON  STREET,  BOSTON 


Entered  U  Second  CUai  Matter,  May  28, 191S,  at  the  Post  OflBce  at  Btuitmi,  IbaMudinietU 

nnder  the  act  of  March  3,  1879 


$• 


The  purpose  of  The  National 
Ecoaomic  League  is  to  create 
an  informed  and  disinterested 
leadership  for  public  opinion — 
a  leadership  that  is  free  from 
partisan  bias  or  class  interest 
and  that  will  be  accepted  as  re- 
presenting the  best  thought  of 
this  country. 


Vol.  VII. 


No.  2 


Ck  Consensua 


OFFICIAL  ORGAN  OF 
THB  NATIONAL   KCONOMIC  LEAGUR 


The  Allied  Debt  to  the 
United  States 


An  Effective  Plan  For  Its  Payment 


Address  by 


Mr.  Frank  A.  Vanderlip 


B«fora  The  Eeonoinic  Club  of  New  York,  November  28Ui.  1921 

HON.  GEORGE  W.  WICKERSHAM 

presiding 


ISSUED  FEBRUARY   1922 


'Y 


PDBLISHRD  QUARTERLY  BY 

THB   NATIONAL   ECONOMIC   LEAGUE 
6  BEACON  STREET,  BOSTON 


Entered  as  Second  ClaM  Matter.  May  28,  191S,  at  the  Pout  Office  at  Boston.  Mafearhnaetu 

under  the  act  of  March  S,  1879 


IPW 


«>(r»i  J^Tt  *<»  t',       c.   CV  :j-    ^,'\ 


u-  ««2iJrj=if: 


IKTENTIONAL  SECOND  EXPOSURE 


Vol.  VII. 


No.  2 


Cbe  Coneerisua 


OmCIAL  OKOAN  OF 
TH«  NATIONAL   KCONOMICI   LEAOUK 


The  purpose  ol  The  National 
Economic  League  U  to  create 
an  informed  and  disinterested 
leadership  for  public  opinion— 
a  leadership  that  is  free  from 
partisan  bias  or  class  interest 
and  that  will  be  accepted  as  re- 
presenting the  best  thought  of 
this  country. 


The  Allied  Debt  to  the 
United  States 


An  Effective  Plan  For  Its  Payment 


AddreM  bj 


Mr.  Frank  A.  Vanderlip 


B«for«  The  Eeonomic  Club  of  New  York,  NoTember  28tb,  1921 

HON.  GEORGE  W.  WICKERSHAM 

prrnding 


■^ 


ISSUED  FEBRUARY   1922 


PUBLISHRD  QUARTERLY   BY 

THE    NATIONAL   ECONOMIC   LEAGUE 
6  BEACON  STREET,  BOSTON 


4 


Entered  u  Second  ClaM  Matter,  May  28.  1915.  at  the  Poat  Office  at  Boston,  MaaaachoaetU 

ander  the  act  of  March  S,  1879 


hi 


f-r/ 


•V. 


AddieM  before  The  Economic  Qub  of  New  Yotk,  November  28th,  1921 


OK 


The  Allied  Debt  to  the  United  States 

An  Effective  Plan  For  Its  Ptxyment 


Hem.  George  W.  Wickersham,  presidiiig 

Hon.  George  W.  Wickersham:  Gentlemen  of  the  Economic 
Club  and  distinguished  guests:  The  Economic  Club  has  the  repu- 
tation of  starting  its  dinners  on  time,  and  of  beginning  its  speaking 
at  a  reasonably  early  hour.  Tonight  I  am  happy  to  say  we  have 
lived  up  to  our  reputation.  As  a  matter  of  fact,  we  are  ten 
minutes  ahead  of  time. 

The  most  interesting  subject  before  the  world  today  is  the 
condition  of  Europe.  Gradually  we  are  coming  to  recognize  that 
our  interests  are  indissolubly  united  with  the  interests  of  Europe, 
and  that  until  we  have  a  reorganized,  a  sound,  a  normal  condition 
of  affairs  in  Europe,  despite  our  great  wealth,  despite  our  pros- 
perity, we  shall  not  have  normal,  healthy  times  at  home. 

There  has  some  conflict  of  voices  come  to  us  from  across  the 
sea,  and  it  has  seemed  to  the  management  of  the  club  that  nothing 
could  be  more  interesting  for  the  opening  meeting  of  our  year 
than  to  have  one  of  the  most  trained,  competent  and  experienced 
American  observers  tell  us  the  results  of  a  five  months'  tour 
through  Europe,  and  give  us  his  interpretations  of  conditions 
abroad,  and  his  thoughts  concerning  the  possible  and  the  best 
lines  of  reorganization  and  of  working  back  towards  a  normal 
condition  in  European  countries. 

Mr.  Vanderlip,  who  will  speak  to  us  this  evening,  needs  no 
introduction  to  this  club,  of  which  he  has  been  President  and 
from  its  inception  one  of  its  most  honored  members.  He  is 
going  to  talk  tonight  on  the  financial  and  industrial  conditions  of 
Europe  as  he  found  them,  and  follow  that  description  with  his 


f.-v 


THE  ECONOMIC  CLUB  OF  NEW  YORK 


ADDRESS  OF  MR.  FRANK  A.  VANDERLIP 


btv'    1 


1 


■'  J 


-■^^ 


suggestions  of  a  new  plan  for  dealing  with  the  Allied  debt  to  the 
United  States.  He  has  asked  me  in  advance  to  state  that  after 
he  has  finished  his  address,  he  will  be  very  glad  to  answer  any 
questions  that  may  be  asked  of  him  by  any  of  the  audience  for  a 
reasonable  time;  indeed,  he  would  welcome  any  inquiry,  because 
he  feels  that  perhaps  he  could  make  more  clear  what  he  has  in 
his  mind  by  answering  direct  questions  than  by  the  body  of  his 
address;  but  in  whatever  form  it  be,  either  his  address  or  the 
answers  to  his  questions,  we  can  not  doubt  that  what  he  has  to 
say  to  us  will  be  a  valuable  contribution  to  our  knowledge  and  our 
thought  on  the  subject.  Mr.  Vanderlip.  (Long  and  continued 
applause.) 


Addctt«by 

Mr.  Frank  A.  Vanderlip 

Mr.  Frank  A.  Vanderlip:  Ladies  and  Gendemen:  Our 
Chairman  very  wisely  said  that  there  are  conflicting  voices  speak- 
ing of  the  European  situation.  I  have  been  greatly  struck  by  the 
conflict  of  opinion  we  have  among  travelers  in  Europe.  It  goes 
through  the  whole  range,  from  people  who  come  back  seeing 
Europe  well  on  the  road  toward  recovery  to  those  who  return 
terribly  blue  about  the  outlook,  fearing  even  that  civilization  is 
in  danger. 

One  of  the  reasons  for  a  conflict  of  opinion  might  be  in  the 
diff^erent  ground  covered.  Some  people  who  see  London  and 
Paris,  and  even  possibly  Berlin,  still  lack  information  about  the 
whole  situation. 

I  have  made  an  extensive  trip.  I  have,  as  the  Chairman  said, 
been  in  Europe  about  five  months,  and  none  of  that  time  has 
been  a  period  of  leisure.  I  have  been  in  every  country  in  Europe 
except  Russia,  Roumania  and  the  Scandinavian  countries.  I  have 
been  in  fifteen  countries.  I  have  seen  most  of  the  responsible 
government  officials,  a  King  or  two — ^there  are  not  so  many  kings 


any  more  (Laughter) — ^the  Sultan,  quite  a  number  of  Presidents 
and  chiefs  of  state,  chancellors,  prime  ministers,  practically  every 
finance  minister  in  Europe,  most  of  the  Ministers  of  Foreign 
Affairs.  I  have  seen  the  leading  bankers  in  every  capital.  I  have 
seen  many  industrial  leaders  and  a  great  many  of  the  union  labor 
men,  for  I  always  feel  that  their  opinion  is  a  point  to  study.  And 
I  can  see  very  readily  why  people  come  home  with  such  varied 
notions. 

The  superficial  aspect  of  Europe  today  shows  distinct  improve- 
ment over  anything  that  has  been  the  case  since  the  Armistice. 
That  is  true  even  of  Vienna,  true  even  of  Warsaw,  where  there  are 
still  starving  people.  Europe  is  at  work  and  the  general  conditions 
of  life  are  better  than  they  have  been  at  any  time  since  the  Armis- 
tice. If  that  is  true,  and  I  am  certain  it  is,  an  observer  of  those 
superficial  conditions  might  very  well  go  home  feeling  that  he  had 
seen  Europe  on  the  road  to  recovery. 

Take  the  situation  in  Germany.  Germany  is  thoroughly  hard 
at  work,  smoking  chimneys  everywhere.  There  are  6,000  more 
men  employed  at  Essen  than  had  ever  been  employed  up  to  the 
outbreak  of  the  war,  and  they  are  making  things  of  peace.  They 
are  turning  out  a  locomotive  every  day.  They  are  turning  out 
agricultural  machinery,  safety  razors,  scissors.  I  went  into  one 
great  factory  that  used  to  turn  out  munitions,  and  the  director, 
who  was  a  guide,  said:    "Ach,  Gott,  cream-separators!" 

All  Germany  is  at  work  and  at  work  efficiently.  I  looked  into 
that.  The  efficiency  is  up  to  pre-war  standard  in  a  good  many 
lines.  The  cities  are  well  kept,  the  roads  are  in  order,  parks  are 
in  fine  shape,  and  the  general  aspect  of  the  people  is  pretty  satis- 
factory. They  are  not  as  well  dressed  as  they  used  to  be.  If  you 
observe  conditions  from  the  hotel  lobby,  the  window  of  a  taxicab, 
or  from  a  table  in  a  night  restaurant,  you  will  find  in  all  those 
capitals  a  gaiety,  an  activity  that  might  easily  lead  one  to  the 
view  that  Europe  is  well  on  the  road  to  recovery.  You  will  see 
that,  as  I  say,  even  in  Vienna,  even  in  Warsaw,  but  that  gaiety 
has  been  described  as  the  flush  on  the  cheek  of  a  dying  patient. 


-wW--*- 


Mpsm*?-^ 


6 


THE  ECONOMIC  CLUB  OF  NEW  YORK 


ADDRESS  OF  MR.  FRANK  A.  VANDERLIP 


.:^-1 


I  should  not  characterize  it  quite  as  strongly  as  that;  neither 
would  I  take  it  as  a  Uue  indication  of  the  general  situation  in 
Europe.  The  truth  is,  as  I  see  it,  that  superficial  conditions  have 
improved.  There  has  been  improvement  in  transportation,  im- 
provement in  the  exchange  of  goods.  People  are  fairly  well  at 
work,  but  the  whole  economic  and  industrial  structure  is  on  an 
insecure  foundation.  If  one  will  look  below  the  surface,  study 
conditions,  and  not  accept  any  mere  superficial  views,  that  situa- 
tion is  clearly  revealed. 

Among  other  things,  among  many  other  things,  Europe  has 
been  afflicted  with  inflation.  I  thought  I  knew  something  of  what 
inflation  was.  I  have  preached  against  it;  I  have  tried  to  point 
out  the  evils,  but  no  human  brain  is  equal  to  imagining  the  hor- 
rors of  inflation  until  you  have  seen  it  worked  out  in  a  great 
community. 

If  I  were  a  devil  looking  for  the  most  eff^ective  single  instrument 
that  could  be  put  into  my  hands  to  wreck  the  human  race,  to 
bring  cruel  injustice  upon  people,  to  break  down  the  morale,  I 
should  choose  the  printing  press  that  prints  money.  It  has  been 
at  work  in  nearly  every  country  of  Europe.  It  has  been  at  work 
in  a  way  that  has  wrecked  the  old  order.  The  prudent  man,  the 
man  who  laid  by  something,  who  had  an  income,  finds  himself  a 
pauper.  The  whole  intellectual  class  in  some  countries  are  almost 
paupers.  Those  people  with  fixed  incomes,  those  people  on  fixed 
salaries,  have  found  their  income  an  absurdity.  The  man  who 
was  wealthy  finds  a  year's  income  sufficing  for  a  day's  need.  This 
situation,  leading  to  the  creation  of  an  amount  of  currency  that 
has  deteriorated  the  standard  of  value,  has  the  most  infinite 
number  of  ramifications. 

No  one  can  make  a  future  contract  with  any  security.  Industry, 
thrift,  foresight  become  jokes.  Business  results  in  a  profit  or  in 
a  loss,  not  according  to  the  industry,  not  according  to  the  way  the 
man  has  managed  his  affairs,  but  according  to  the  way  the  ex- 
change market  moves.  I  have  had  men  of  great  affairs  say  to  me 
that  business  has  become  a  speculation,  a  speculation  in  exchange, 


and  that  as  they  must  speculate  if  they  did  business  they  would 
rather  engage  in  the  speculation  unhampered  by  any  business 
transaction.  It  has  put  a  paralyzing  hand  upon  business.  I  have 
seen  factories  with  a  crowd  of  workmen  at  one  door  ready  to  go 
to  work  if  they  could  only  get  the  job,  with,  metaphorically 
speaking,  a  crowd  of  customers  at  another  door  ready  to  take  the 
product;  with  the  fires  banked  and  the  factory  idle  because  the 
owner  was  not  ready  to  take  the  chances  of  future  prices  in  a 
currency  that  was  deteriorating  day  by  day,  melting  in  its  value 
like  snow  in  the  sun. 

The  rapidity  with  which  that  goes  on  is  startling.  Now,  I  was 
not  in  Europe  so  very  long.  I  did  not  go  to  Germany  in  the  first 
instance,  but  when  I  went  to  Germany,  I  got  79  marks  for  one 
dollar.  When  I  was  there  a  few  weeks  later,  I  got  160,  180,  200, 
and  within  five  days  after  I  left  the  mark  was  quoted  at  330  to 
the  dollar. 

What  provision  for  the  future  can  a  man  make  with  that  sort 
of  foundation  for  his  operations  to  stand  upon?  Is  everybody 
mad?  Is  this  running  of  printing  presses  an  evidence  of  madness? 
Are  finance  ministers  fools?  I  do  not  think  so.  I  did  not  find 
them  so.  I  found  them  all  a  very  sensible,  clear-eyed  set  of  men. 
They  knew  perfectly  the  evils  of  the  printing  press;  they  saw 
the  course  they  were  all  taking,  taking  into  a  vortex,  but  they 
said  they  were  helpless,  and  I  believe  they  are  helpless.  This 
smug  advice  that  we  have  all  been  giving  Europe  to  cut  down  its 
expenses,  to  increase  its  taxation,  to  balance  its  budget,  to  stop 
printing  paper — is  the  classical  advice  of  the  economist;  and  it  is 
just  as  impossible  for  those  finance  ministers  to  take  that  advice 
and  act  on  it  as  it  would  be  for  a  man  who  has  been  awake  for 
a  week  with  insomnia  to  be  told  to  go  to  bed  tonight,  sleep 
soundly,  and  he  will  feel  a  whole  lot  better  in  the  morning. 

They  cannot  do  it.  They  are  in  the  grip  of  a  situation  which 
makes  further  issue  of  paper  inevitable.  I  made  a  proposal  in 
regard  to  the  formation  of  a  bank  which  should  be  on  the  lines 
of  our  own  Federal  Reserve  System,  which  should  offer  a  uniform 


THE  ECONOMIC  CLUB  OF  NEW  YORK 


ADDRESS  OF  MR.  FRANK  A.  VANDERLIP 


% 


currency  to  Europe,  a  currency  which  is  absolutely  divorced  from 
Government  printing  presses;  and  that  is  one  principle  that  must 
be  observed  in  any  new  currency  to  take  the  place  of  this  mass 
of  paper.  I  am  not  going  to  enter  into  that  plan  tonight.  There 
is  not  much  necessity  for  America  giving  it  immediate  considera- 
tion. As  I  told  all  of  my  friends  over  there,  the  initiative  must 
come  from  the  other  side.  We  are  not  going  to  gather  up  a  huge 
amount  of  capital  and  take  it  over  there,  ha^  in  hand,  and  ask 
them  to  use  it  in  this  way.  Something  of  the  sort  must  be  done. 
There  is  nothing  curative  working  in  the  situation  so  far  as  their 
currency  is  concerned.  It  is  steadily  depreciating,  and  will  keep 
on  steadily  depreciating,  particularly  in  those  Central  European 
Countries,  where  all  control  of  the  situation  has  been  lost.  It  will 
be  necessary  to  take  a  radical  step  and  create  a  currency,  dis- 
associated from  the  printing  press.  But  I  am  not  going  to  enter 
into  that  tonight. 

Europe  has  a  lot  of  diseases  besides  this  currency  disease,  and 
a  remedy  for  one  of  them  will  probably  have  little  or  no  effect  on 
many  of  the  others.  Don't  look  for  any  patent  nostrum  to  cure 
Europe.  It  is  too  sick.  It  has  got  to  many  ailments  of  too  varied 
a  character.  It  will  need  a  good  many  remedies,  applied,  I  fear, 
over  a  considerable  length  of  time. 

Among  the  other  diseases  is  the  disease  of  a  budget  deficit. 
Every  country  on  the  Continent  is  running  with  a  deficit,  most  of 
them  with  huge  deficits.  Their  expenses  are  too  high,  and  very 
difficult  to  reduce.  Their  taxes  are  not  high  enough,  and  very 
difficult  to  raise.  Finance  ministers  hold  office  at  the  will  of  the 
majority,  and  if  they  do  unpopular  things,  they  cease  to  be  finance 
ministers. 

It  is  exceedingly  unpopular  to  raise  taxes  to  a  point  beyond 
which  no  one  had  ever  dreamed  in  former  times.  Taxes  are  very 
high  now.  As  a  rule,  they  do  not  extend  with  great  severity  to 
the  peasant,  and  they  do  fall  with  the  greatest  severity  upon 
business,  upon  business  men,  upon  people  who  once  had  fortunes. 

The  difficulty  of  balancing  budgets  is  an  extremely  great  one, 


and  it  is  not  enough  to  say  that  responsible  men  are  fools,  that 
they  are  weak  politicans,  that  they  ought  to  take  hold  of  the 
situation  firmly.  The  situation  is  too  complicated,  it  is  too  diffi- 
cult, to  have  the  remedy  built  on  the  lines  of  classical  economic 

advice. 

There  is  another  disease,  a  disease  of  map-makmg,  a  disease 
engendered  by  cutting  up  Europe  with  a  pair  of  sharp  scissors 
and  without  any  economic  forethought  whatever.  This  idea  that 
people  have  a  right  to  govern  themselves,  that  the  consent  of  the 
governed  is  necessary,  that  there  should  be  self-determination  by 
people  as  to  what  form  of  government  they  are  to  have,  is  a  very 

beautiful  idea. 

The  theory  of  self-determination  had  in  it  much  that  was  fine 
political  doctrine.  As  it  was  worked  out,  it  has  proven  one  of 
the  greatest  curses  that  has  fallen  on  Europe,  among  a  host  of 
curses.  Little  nations  have  been  created  without  an  economic 
possibility  of  continued  life.  Racial  antagonisms  have  been 
fanned  into  a  new  and  a  white  heat.  The  difficulty  of  doing 
business  across  these  numerous  borders  is  so  great  that  it  has 
become  almost  an  impossibility.  There  was  something  in  this 
idea  of  self-determination,  but  there  was  something  lacking  in  its 
application.    I  have  thought  a  good  deal  on  that  subject. 

You  know  that  we  have  learned,  I  think,  in  the  last  century  or 
two,  something  of  what  individual  liberty  is,  and  I  think  we  have 
learned  this,  that  individual  liberty  is  not  license  \n  do  as  we 
please.  Individual  liberty  is  a  matter  of  restrictions.  You  and  I 
can  do  as  we  please  about  our  absolutely  personal  affairs.  If  we 
want  liberty  we  must  live  in  a  community,  however,  that  restricts 
us  and  our  fellows,  wherever  we  come  in  contact  with  our  fellows. 
That  I  think  is  clear,  that  liberty  is  a  matter  of  restriction.  And 
I  think  that  applies  to  the  State,  to  the  society  of  nations. 

I  believe  we  have  got  to  have  a  new  concept  of  the  State  come 
into  the  minds  of  Europe,  a  concept  that  will  reject  this  idea  of 
supreme  sovereignty  for  every  state.  Supreme  sovereignty  of 
every  state  means  international  anarchy.    There  have  got  to  be 


^1 


•'  <  ] 


'>^ 


:-.:^.^ 


\  A- 


10 


THE  ECONOMIC  CLUB  OF  NEW  YORK 


limitations  where  these  nations  come  in  contact  with  their  fellow 
nations;  and  it  is  that  which  was  lacking  in  the  application  of 
his  theory  of  self-determination. 

You  could  carry  self-determination  to  the  nth  power.  You 
could  have  nations  as  small  as  you  liked  and  have  them  conduct 
their  internal  affairs  as  they  willed,  if  you  had  limitations  in  re- 
gard to  their  conduct  one  to  another.  That  new  concept  of  the 
State  may  be  one  of  the  salvations  of  Europe.  It  will  be  very 
slow  in  coming. 

There  are  a  few  men  who  see  it.  That  young  statesman  in 
Czecho-Slovakia,  the  Prime  Minister  Benes — they  pronounce  it 
Benesch;  it  is  spelled  B-e-n-e-s — is  one  of  the  great  minds  of 
Central  Europe.  I  think  about  the  one  subject  I  found  everybody 
in  Central  Europe  agreed  on  was  that  Benes  was  the  ablest 
statesman  in  Central  Europe.  He  is  an  advocate  of  federation,  of 
limitation  upon  states,  and  there  is  a  great  number  of  men  who 
see  that  something  like  a  United  States  of  Europe  is  the  salvation 
of  Europe.  But  that  idea  is  a  long  way  in  the  future.  There 
will  need  to  be  education,  perhaps,  for  a  generation  or  two,  be- 
fore that  can  be  gripped,  but  unless  it  is  gripped,  there  are  people 
who  must  economically  perish,  if  the  idea  of  little  nations,  supreme 
in  sovereignty,  blind  to  the  unity  of  society,  antagonistic  to  all 
their  fellows,  persist  in  an  attempt  to  exist. 

I  got  a  view  of  self-determination  from  a  little  Turkish  girl  in 
a  college  in  Constantinople  that  made  me  think.  I  will  give  it  to 
you  for  what  it  is  worth.  She  said,  "I  think  the  idea  of  self- 
determination  as  originated  by  your  President,  was  in  his  mind 
a  beautiful  political  theory.  I  think  as  grasped  by  Lloyd  George 
and  Clemenceau  it  was  a  theory  by  which  Europe  could  be  cut 
up  into  militarily  defenseless  states,  so  that  there  could  be  no 
great  strength.  The  curse  of  self-determination  has  been  wrought 
on  us  so  as  to  destroy  strong  military  powers." 

Now,  I  wish  I  could  go  into  this  European  situation  as  I  would 
like  to.  I  am  like  a  jug  full  of  water,  I  don't  know  quite  where  to 
begin,  but  worse  than  that,  I  have  got  something  long  and  rather 


ADDRESS  OF  MR.  FRANK  A.    VANDERLIP 


11 


serious  to  say  to  you  later  on  a  single  subject.  If  I  could  go  into  the 
difficulties  more  fully,  if  I  did  describe  them  more  in  detail,  I  think 
I  would  trace  nearly  every  difficulty  to  one  source,  and  it  would  be 
that  poison  treaty  of  Versailles.  I  have  come  to  believe  that  that 
treaty  was  conceived  in  hatred  and  malice,  in  blindness  and  un- 
wisdom, and  that  many,  if  not  all,  of  the  ills  of  Europe  today  are 
traceable  to  the  unwisdom  of  that  treaty. 

I  think  Gladstone  once  said  of  the  American  Constitution  that 
it  was  the  wisest  document  ever  struck  off  by  the  human  brain, 
rd  like  to  paraphrase  that  and  say  the  treaty  of  Versailles  was 
the  most  unwise  document  ever  struck  off  by  the  human  brain. 
(Applause.)  There  were  atrocities  committed  at  Versailles  that 
are  incomparably  greater  than  any  of  the  atrocities  of  the  war. 
(Applause.)  They  are  continuing  to  cut  off  people's  hands;  to 
cut  off  the  hands  and  the  legs  of  nations,  and  make  millions  of 
people  suffer. 

Now,  I  am  not  speaking  so  much  about  the  way  the  Versailles 
Treaty  treated  Germany.  That  is  where  one's  mind  turns  first. 
Let  us  begin  somewhere  else  —  for  example,  Constantinople, 
Turkey.  Look  at  the  situation  of  Constantinople  today,  a  city 
of  a  million  and  a  half  people,  with  that  population  augmented 
by  two  hundred  thousand  Russian  refugees,  and  three  hundred 
and  sixty  thousand  Turkish  refugees.  A  good  part  of  the  Rus- 
sian refugees  have  been  distributed.  The  Turkish  refugees  are 
still  there.  Now,  all  there  is  left  of  the  Turkish  nation  in  Europe 
is  enough  for  market  gardens,  around  Constantinople.  A  gun  on 
the  Greek  border  can  bombard  Constantinople  now.  I  am  not 
speaking  metaphorically.  I  am  speaking  exactly  when  I  say  there 
is  no  possibility  of  raising  in  Turkish  territory  for  feeding  Con- 
stantinople anything  but  garden  truck.  That  is  all  the  room  there 
is.  Then  the  Greeks  were  put  by  the  Allies  into  Smyrna,  and 
immediately  started  inland  to  conquer  the  Turks.  The  result  is 
that  all  Asia  Minor  is  aflame,  and  is  utterly  cut  off  from  the  old 
Caliphate,  and  Constantinople,  with  a  million  and  a  half  people, 
plus  its  refugees,  stands  there  on  its  bit  of  national  island,  and  has 


1.^ 


•4 


12 


THE  ECONOMIC  CLUB  OF  NEW  YORK 


got  to  buy  all  its  food  in  terms  of  foreign  exchange,  raises  nothing, 
and  must  in  some  way  supply  the  credit  in  terms  of  foreign  ex- 
change or  must  starve. 

Well,  it  is  starving.  Do  you  know  it  is  almost  incredible  how 
one  can  get  used  to  starving  people?  Why,  I  walked  by  starving 
people  and  went  in  and  had  a  good  meal.  You  get  callous  to  it. 
There  are  lots  of  starving  people  in  Europe.  It  isn't  a  spectacular 
thing.  Your  starving  person  does  not  come  out  into  the  public 
square  and  suffer.  He  withdraws  himself.  He  gradually  fades 
away.  There  is  nothing  spectacular  about  it,  but  it  is  going  on 
in  many  countries. 

There  has  been  raised  a  problem  in  Constantinople  that  you 
are  going  to  hear  from.    How   those  people  can  continue  to 
supply  the  foreign  credits  to  buy  all  their  food  is  something  that 
the  best  minds  in  Constantinople  can  not  answer,  and  they  look 
for  a  catastrophe.     The  placing  of  the  Greeks  in  Smyrna,  the 
giving  to  the  Greeks  of  that  great  sweep  of  territory  along  the 
north  of  the  Aegean  Sea,  Thrace,  has  furnished  ground  for  the 
erection  of  a  monument  of  failure.    The  Greek  administration  is 
a   monument  of   failure.     Nothing   that  the   Turks  were   ever 
charged  with  has  not  been  duplicated  by  the  Greeks,  and  they 
have  stirred  up  a  situation  in  Asia  Minor  which  will  burn  until 
they  are  burned  out  of  there.    I  do  not  think  there  is  any  doubt 
of  that.     But  it  is  not  peace,  it  is  not  good  administration  and  it 
was  not  a  wise  disposition  of  a  very  complicated  question.     In 
giving  this  territory  of  Thrace  to  Greece  there  was  taken  away 
from  Bulgaria  and  from  Jugo-Slavia  every  outlet  to  the  Aegean 
Sea.    They  will  never  rest  under  that  situation.    Sooner  or  later 
they  will  demand  an  outlet  to  the  sea.    Jugo-Slavia  now  needs 
that,  Bulgaria  must  have  it;  they  have  only  got  two  very  mediocre 
ports  in  the  Black  Sea,  and  there  will  be  more  map  chan^inj^. 

Let  us  move  on  to  Hungary.  There  was  a  kingdom  a  thousand 
years  old  that  had  stood  solidly  for  a  thousand  years,  and  it  was 
shorn  right  around  by  the  map  makers.  To  see  an  old  map  of 
Hungary  makes  you  think  of  a  molding  board  with  some  batter 


ADDRESS  OF  MR.  FRANK  A.  VANDERLIP 


13 


on  it  and  somebody  cutting  out  the  center  with  a  cooky  cutter; 
such  a  piece  would  be  the  present  Hungary. 

All  around  it  is  territory  that  for  a  thousand  years  had  belonged 
to  the  old  Kingdom,  and  it  is  now  ruled  by  Austria,  by  Czecho- 
slovakia, by  Roumania,  and  by  Jugo-Slavia;  and  Roumania, 
for  one,  is  not  a  very  good  ruler.  They  compared  it  over  there  to 
taking  New  England  from  the  United  States  and  putting  it  under 
Mexican  administration.     (Laughter.) 

That  piece  of  map  drawing  is  not  going  to  stand.  And  so  one 
might  go  through  with  it,  but  I  am  dwelling  too  long  on  this  part 
of  what  I  have  to  say. 

Let  us  come  to.  Germany.  Germany  ought  to  have  to  pay  in 
my  opinion  every  mark  that  she  is  capable  of  paying  in  reparation 
of  the  damage  that  she  did.    (Applause.) 

But  I  would  try  to  be  wise  and  get  as  much  as  possible  rather 
than  to  be  too  grasping  and  get  none.     (Applause.) 

Claims  for  indemnity  weie  laid  upon  Germany  that  anybody 
who  could  add  2  and  2  could  see  were  impossible  of  execution. 
But  the  people  who  laid  the  terms  could  not  add  2  and  2  when 
it  came  to  talk  about  indemnity.    (Applause.) 

Germany  is  going  to  fail  to  pay  that  indemnity.  It  is  impossible 
for  her  to  pay  it  in  the  terms  that  are  laid.  Well,  what  is  going 
to  happen  then? 

I  put  that  question  to  one  of  the  greatest  bankers  in  Germany, 
one  of  the  wisest  men  in  Germany — what  is  going  to  happen  when 
you  fail  to  meet  your  indemnity?  "Well,"  he  said,  "nobody  can 
answer  that.  The  situation  is  too  complicated  to  hazard  a  guess, 
almost.  But,  of  course,  I  have  thought  of  it;  and  this  is  the 
picture  that  I  see.  We  will  sooner  or  later,  and  pretty  soon,  fail 
to  make  an  indemnity  payment.  France  will  invade  the  Ruhr 
Valley.  That  will  make  a  political  situation  which  will  result  in 
the  Rhine  Provinces  sloughing  off  from  Prussia  and  forming  a 
Rhine  Federation.  I  would  then  expect  to  see  Bavaria  cut  off 
and  join  Austria  and  form  the  beginning  of  a  Danubian  Federa- 


Rfg^^^^ji^l  Siid 


va^wi 


)^. 


KA 


l.r     -/ 


14 


THE  ECONOMIC  CLUB  OF  NEW  YORK 


tion.    Prussia  will  be  left  where  she  was  100  years  ago,  isolated, 
alone,  but  with  a  Bolshevik  Berlin  in  her  heart" 
Not  a  pretty  picture.    It  may  not  be  true.    It  is  worth  thinking 

of. 

Let  me  give  you  another  German  picture.  I  will  name  the 
artist  this  time.  It  was  Rathenau,  the  Minister  of  Reconstruction, 
a  man  generally  admitted  as  the  most  brilliant  man  in  Germany 
today.    He  said  to  me: 

"The  German  people  are  the  most  law-abiding  people  in  the 
world.  They  follow  the  law.  They  are  not  revolutionary,  nat- 
urally. But  there  is  a  weight  of  human  misery  going  to  fall  upon 
Germany  as  this  financial  decay  progresses,  a  pressure  of  human 
misery  that  may  drive  them  to  something  out  of  the  national 
character.  "Observe,"  he  said,  "that  for  2,000  years  Europe  has 
been  divided  into  East  Europe  and  West  Europe;  Western 
Europe,  the  land  of  progressive  civilization;  East  Europe,  Asiatic 
and  Oriental  civilization,  a  civilization  without  progress." 

That  line,  dividing  east  and  west  Europe,  has  wavered  through 
the  centuries.  It  went  west  and  wiped  out  Greece.  It  was  driven 
back  by  Rome.  It  came  west  again  up  to  the  very  walls  of  Vienna, 
when  the  Turks  almost  captured  Vienna.  Again  it  was  driven 
back  and  in  modem  times  it  has  rested  on  the  Vistula.  Beware 
that  it  does  not  come  to  rest  upon  the  Rhine,  with  300,000,000 
people  east  of  that  line;  300,000,000  people  out  of  western  civili- 
zation who  might  form  a  horde  that  might  overflow  and  wipe 
out  Western  civilization." 

Now,  he  uttered  that,  not  as  a  threat,  but  as  an  awful  possi- 
bility. Let  me  give  you  another  picture  along  that  line,  this  time 
from  a  minister  of  the  Government  in  Hungary.  He  happened  to 
be  a  man  I  have  known  for  20  years,  one  of  the  most  highly 
educated,  one  of  the  most  cultivated  men  of  my  entire  acquaint- 
ance, anywhere  in  the  world, — a  man  who  was  educated  in 
America  by  the  way.  He  said  to  me,  "I  have  been  a  protagonist 
of  Western  Civilization.  I  have  believed  in  it.  I  have  wanted  my 
people  to  be  a  part  of  it,  but  I  am  through  with  Western  Civiliza- 


ADDRESS  OF  MR.  FRANK  A.  VANDERLIP 


15 


tion.  It  is  bankrupt,  in  my  opinion.  It  has  been  guilty  of  every- 
thing with  which  it  has  ever  charged  Eastern  Civilization.  It  has 
been  dishonest.  It  has  been  cruel.  It  has  been  lustful  of  power. 
It  has  done  everything  that  Eastern  Civilization  was  ever  charged 
with,  and  we  have  lost  faith.  Hungary  in  the  future  will  be  the 
western  boundary  of  Eastern  Civilization,  and  not  the  eastern 
boundary  of  Western  Civilization." 

I  do  not  think  that  man  spoke  for  his  people,  but  he  said, 
"There  will  be  a  Tourainian  Union  of  the  Tourainian  people,  and 
they  will  overflow  Europe.  They  will  make  Attila  look  like  a 
nursery  maid."  Now,  that  is  too  strong,  but  it  is  among  the 
things  to  think  about. 

Well,  that  Treaty  is  going  to  be  rewritten.  I  doubt  if  it  is  re- 
written by  the  Allies.  It  is  going  to  be  rewritten  by  the  march  of 
events.  The  map  of  Europe  is  as  unstable  as  quicksilver,  in  my 
opinion.  It  has  been  cut  in  a  way  that  can  not  stand  and  will  not 
stand.    We  will  see  a  re-writing  of  the  Treaty  of  Versailles. 

Now,  one  of  the  sad  things  about  the  European  situation  is  that 
there  is  little,  if  anything,  that  is  curative  at  work  at  the  present 
time.  Much  that  is  bad  is  of  a  progressive  character,  and  is  get- 
ting worse.  There  is  the  greatest  need  for  constructive  states- 
manship. It  is  a  grave  situation,  and  it  needs  minds  that  are 
constructive,  that  will  help  build  something  new  on  this  tremen- 
dous foundation. 

You  know  I  feel  as  if  I  just  discovered  Europe.  Going  as  I 
have,  from  one  country  to  another,  passing  through  15  countries 
with  my  eyes  open,  I  have  been  tremendously  impressed  with 
what  you  might  call  the  plant  of  Europe:  the  vast  agricultural 
areas;  the  splendid  industrial  plants;  the  wonderfully  beautiful 
cities;  the  fine  people.  It  must  not  go  into  decay.  No  matter 
how  serious  these  financial  obligations,  no  matter  how  complete 
the  disorganization  of  the  machine  of  commerce  has  been,  it  must 
be  revivified.  Things  must  be  put  together  and  started  again. 
(Applause.) 

And  so  I  think  any  one  studying  Europe  should  study  it  now 


a 


*  i 


^^ii^'^^^i^i^ifma^i^ 


16 


THE  ECONOMIC  CLUB  OF  NEW  YORK 


ADDRESS  OF  MR.  FRANK  A.   VANDERLIP 


17 


■         V 

I'  •■  -'i 


y\ 


not  so  much  to  diagnose,  not  so  much  to  report — we  all  know 
more  or  less  about  how  sick  Europe  is, — ^but  study  it  construc- 
tively, to  see  if  something  helpful  can  not  be  proposed.  And  so 
instead  of  really  telling  you  the  story  of  Europe,  and  I  have  not 
pretended  to  do  that  tonight,  I  want  to  go  on  into  a  serious  and, 
I  hope,  constructive  suggestion.  I  want  to  talk  to  you  very 
seriously  about  a  plan  for  handling  the  inter-allied  indebtedness. 
I  am  sorry  to  say  that  I  am  going  to  read  that,  not  because  I  am 
unable  to  talk  it,  but  because  I  want  to  present  it  to  you  with  the 
auhority  of  the  written  word,  so  you  will  know  that  what  I  say 
is  carefully  considered. 

The  Great  War  increased  the  internal  debts  of  the  European 
belligerents  from  $17,000,000,000  to  $155,000,000,000,  a  nine-fold 
increase.  The  external  debts  of  these  countries,  which  before  the 
War  were  insignificant,  are  now  in  excess  of  $25,000,000,000. 

A  situation  in  which  governments  owe  to  other  governments 
sums  of  such  huge  proportions  is  unparalleled  in  the  financial 
history  of  the  world.  Internal  debts  may  reach  fantastic  figures, 
but  so  long  as  a  government  has  a  printing  press  on  which  it  can 
turn  out  legal  tender  it  can  always  pay  interest  on  its  internal 
loans.  Its  debts  to  other  nations  are  quite  different  affairs.  A 
printing  press  will  not  pay  these:  nothing  will  permanently  dis- 
charge them,  when  the  sum  ranges  into  such  figures  as  these  debts 
have  reached,  except  excess  of  exports  of  goods. 

Such  huge  debts  as  these  owed  and  owing  to  various  nations 
make  future  financial  calculations  impossible.  Thus  far  neither 
interest  nor  principal  has  been  paid  on  these  debts,  and  their 
weight  has  been  psychological.  They  have  not  yet  actively 
figured  in  international  exchanges.  They  make  a  load  of  potential 
obligations,  however,  that  has  paralysed  the  minds  of  statesmen 
responsible  for  the  conduct  of  many  European  governments. 
They  turn  hopelessly  from  this  load  of  debt  and  see  no  possibility, 
while  it  is  unadjusted,  of  a  return  to  financial  stability.  Some 
settlement,  therefore,  of  inter-government  obligations  seems  an 
imperative  prerequisite  to  future  financial  stability. 


I  do  not  propose  to  enter  into  the  nature  of  which  may  be 
termed  stricdy  inter-allied  debts,  that  is,  the  debts  between 
European  nations.  Those  debts  did  not  arise  in  anything,  like 
the  clean-cut  way  in  which  were  created  the  obligations  of  the 
Allies  to  the  United  States.  In  some  respects  they  were  litde 
more  than  convenient  War  bookkeeping.  Many  counterclaims 
can  be  pleaded.  The  debts  due  from  the  Allies  to  the  United 
States  stand  on  a  quite  different  basis  from  the  debts  that  arose 
between  the  Allies.  The  debts  due  our  government  are  specific 
signed  obligations  to  repay.  Our  government  placed  dollars  to 
the  credit  of  the  various  Allies.  It  is  true  that  these  credits,  gen- 
erally speaking,  were  restricted:  they  could  be  used  only  to  pay 
for  material  or  produce  purchased  in  the  United  States.  That 
restriction  was  not  universal,  however.  Considerable  sums  arising 
from  the  credits  granted  to  Great  Britain  were  devoted  by  the 
British  Government  to  stabilising  the  sterling  market  exchange. 
Loans  so  used  found  their  way  to  pay  for  wheat  in  the  Argentine, 
and  to  setde  other  international  obligations  than  those  due  to  the 
United  States. 

When  the  United  States  Government  loaned  these  sums  of 
money  to  the  Allies,  our  government  expected  repayment.  At  the 
time  the  loans  were  made  there  was  never  a  suggestion  that  they 
should  be  regarded  as  part  of  our  contribution  to  America's  war 
effort.  To  provide  the  funds  so  loaned  we  sold  Liberty  Bonds 
and  War  Savings  Stamps.  The  Treasury  Department  instructed 
those  responsible  for  the  sale  of  these  securities  to  emphasize  the 
fact  that  part  of  the  money  the  Treasury  got  in  from  American 
investors  was  being  reloaned  to  European  governments;  that  those 
loans  would  be  repaid,  and  that  the  interest  burden  upon  our  tax- 
payers would  be  lightened  by  interest  payments  we  were  to 
receive  from  the  European  debtors. 

With  the  close  of  the  War,  there  began  to  arise  in  Europe  con- 
fusion of  thought  and  irresolution  of  purpose  in  regard  to  the 
repayment  of  these  loans.  Their  total  had  become  so  huge,  the 
debtors  had  become  so  impoverished,  that  the  weight  of  the  bur- 


-    II 


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THE  ECONOMIC  CLUB  OF  NEW  YORK 


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hH        '»\-     --.. 


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ADDRESS  OF  MR.  FRANK  A.  VANDERLIP 


19 


den  seemed  in  the  eyes  of  Europeans  to  be  intolerable,  and,  being 
intolerable,  to  be  unjust. 

In  the  minds  of  our  European  debtors  the  argument  ran  in  this 
way:  We  had  all,  Allies  and  Associates  alike,  been  engaged  in  a 
common  purpose.  It  was  as  important  to  America  as  it  was  to 
the  Allies  that  the  War  be  won.  Rightly  or  wrongly,  America 
had  come  into  active  participation  only  toward  the  end  of  the 
struggle.  No  matter  how  essential  American  help  may  have  been, 
it  was  their  feeling  that  America  performed  in  the  field  no  great 
military  feat  before  hostilities  ended.  Our  debtors  argue  that 
there  had  been  a  long  period  prior  to  our  entry  into  the  War, 
during  which  we  sold  to  the  Allies  billions  of  dollars'  worth  of 
produce  and  military  equipment.  We  had  charged  high  prices; 
presumably  we  made  great  profits.  The  close  of  the  War  found 
the  Allies  financially  impoverished,  horribly  hurt  by  loss  of  man 
power,  and  facing  the  necessity  for  vast  expenditures  for  recon- 
struction. The  outlook  for  reimbursement  of  these  expenditures 
from  German  indemnity  rapidly  grew  more  and  more  nebulous. 

With  such  considerations  in  mind  it  was  easy  for  debtors  to 
argue,  with  a  logic  that  convinced  their  own  minds,  that  America 
had  come  into  the  War  late,  had  largely  profited  financially  before 
she  entered  the  War,  had  sustained  no  direct  material  war  damage, 
and  had  lost  comparatively  few  men.  It  was  easy  for  them  to 
argue  that  as  America  had  emerged  from  the  war  the  one  really 
solvent  nation,  it  would  be  not  only  a  matter  of  good  sense  on  the 
part  of  a  rich  creditor,  but  as  well  a  matter  of  sound  justice,  if 
we  should  cancel  these  obligations  of  the  Allies  so  far  as  these 
obligations  are  measured  by  financial  indebtedness  to  us. 

That  opinion  has  come  to  be  held  generally  in  Europe.  There 
is  growing  irritation  because  it  is  felt  that  we  are  again  exhibiting 
the  same  cautious  slowness  when  we  hesitate  about  cancelling 
these  obligations  that  we  showed  before  we  determined  to  come 
into  the  War  at  all. 

In  their  own  counsels  at  least  nearly  every  nation  blankly  ad- 
mits inability  to  pay. 


Great  Britain  takes  a  somewhat  different  attitude.  There  are 
owed  her  by  other  nations  a  sum  exactly  equal  to  the  amounts 
she  owes  the  United  States.  Why  should  not  her  credits  cancel 
her  debts?  Many  Englishmen  are  slow  to  say  they  do  not  owe 
this  debt,  but  on  the  other  hand  there  are  many  people  in  respon- 
sible positions  in  England  who  hold  that  the  debt  should  not  be 
considered  on  the  same  basis  as  «m  ordinary  relation  between 
debtor  and  creditor. 

The  foregoing  is  a  fair  picture  of  the  situation  today.  The  total 
weight  of  international  obligations  has  become  so  great  that  it 
menaces  all  future  financial  stability.  It  promises  to  make  the 
recovery  of  general  financial  stability  in  Europe  impossible  unless 
some  means  for  adjusting  these  debts  be  found.  All  debtors  would 
like  to  see  a  general  clearing  of  these  obligations.  Most  of  them 
have  argued  themselves  into  a  frame  of  mind  in  which  doubt  is 
raised  as  to  the  justice  of  an  attitude  by  the  United  States  looking 
toward  the  enforcement  of  the  obligations.  In  any  event,  it  is 
believed  both  by  statesmen  and  financiers  that  it  is  impossible  for 
Europe  to  stagger  back  to  stability  under  this  enormous  load  of 
international  debts. 

England  would  be  quite  willing  to  pay  what  she  owes  if  she 
could  be  paid  what  she  is  owed;  failing  that,  the  feeling  there  is 
general  that  her  obligations  should  be  cancelled  if  she  cancels  the 
obligation  due  her. 

The  French  have  the  least  objectivity  in  their  point  of  view  of 
any  people  in  Europe.  Their  patriotism  and  nationalism  are  so 
intense,  their  belief  that  France  is  a  sacred  repository  of  world 
culture  is  so  complete,  that  the  examination  of  any  subject  what- 
ever in  France  starts  with  this  axiom:  "France  has  been  dam- 
aged; that  damage  must  be  made  good;  France  must  be  restored." 
No  matter  how  remote  a  subject  may  be  from  the  forces  which 
involved  France  in  this  damage,  it  is  never  considered  except  upon 
the  postulate  of  this  axiom.  France  has  been  injured;  her  injuries 
must  be  repaired.    Unless  the  conclusions  in  regard  to  any  prob- 


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ADDRESS  OF  MR.  FRANK  A.  VANDERLIP 


21 


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lem  square  with  that  axiom,  the  conclusions  are  set  down  as 
wrong. 

Europe  feels  it  is  today  gripped  in  the  jaws  of  pinchers,  the 
handles  of  which  are  two  sets  of  financial  obligations,  impossible 
of  discharge.  One  handle  of  those  pinchers  is  the  war  indemnity, 
the  other  the  inter-government  debts.  By  everyone  outside  of 
France  it  is  admitted  that  the  indemnity  as  laid  is  impossible  of 
execution.  Furthermore,  England  sees  that  if  the  indemnity 
could  be  paid,  its  fulfillment  would  for  the  time  being  ruin  English 
industry.  Outside  of  France  there  is  unanimity  of  opinion  that 
unless  the  terms  of  the  indemnity  are  materially  altered,  Germany 
will  go  into  financial  collapse.  Impossible  as  the  terms  of  the 
indemnity  are  admitted  to  be,  the  Allies  find  their  initiative  for 
its  alteration  paralysed,  because  they  see  that  if  the  indemnity 
was  so  altered  as  to  become  a  tolerable  burden  for  Germany,  the 
Allies  would  still  find  themselves  facing  a  burden  of  inter-Allied 
indebtness  as  intolerable  to  them  as  are  the  existing  terms  of 
reparation  to  Germany.  To  ease  the  burdens  on  the  back  of 
Germany  only  to  find  themselves  crushed  by  the  weight  of  inter- 
allied debts  that  is  hopelessly  heavy,  paralyses  their  purpose  to 
deal  with  the  indemnity  situation.  And  so  thus  far  Germany  has 
been  left  to  drift  rapidly  on  a  course  that  seems  likely  to  end  in 
a  financial  debacle. 

In  England  there  is  a  sharp  awakening  to  the  economic  sig- 
nificance of  receiving  great  international  payments  such  as  those 
involved  in  the  figures  of  the  indemnity,  or  the  figures  of  the 
inter-Allied  debts.  Such  totals  can  only  be  paid  in  goods.  Goods 
exported  by  one  nation  come  into  competition,  either  in  the  home 
markets  of  the  creditors,  or  in  neutral  markets  where  they  arc 
disposing  of  their  own  products.  It  is  seen  that  the  export  of 
goods  sufficient  in  amount  to  meet  claims  of  such  magnitude  as 
the  indemnity,  or  the  inter-government  debts,  cuts  new  channels 
of  commerce  that  may  hurt  the  nation  receiving  payment  as  much 
as  it  burdens  the  nation  making  payment.  These  considerations 
lead  to  a  search  for  some  means  of  at  least  passing  the  inter- 


government  debts  through  a  clearing  house  and  reducing  their 
total  volume.  Such  a  process  would  help  those  nations  who  both 
owe  and  are  owed,  but  it  would  leave  the  strictly  debtor  nations 
still  in  an  intolerable  position. 

By  all  odds  the  largest  total  among  the  inter-government  debts 
is  the  sum  owed  the  United  States  by  the  Allies.  The  economic 
incidence  of  the  debt  due  us  is  complicated  by  the  fact  that  the 
United  States  is  solely  a  creditor.  We  owe  no  other  nation.  In 
a  general  clearing  of  debt,  no  one  could  offset  any  of  our  claims 
by  a  credit  which  would  reduce  the  amount  that  others  owe  us. 

In  view  of  these  considerations,  it  is  not  surprising  to  find  that 
European  statesmen  are  unfavorable  to  the  full  recognition  of  the 
American  debt.  That  sentiment  is  variously  manifested.  In  many 
minds  the  fundamental  justice  of  the  obligation  is  questioned.  In 
England  there  is  a  strong  feeling  that  some  way  ought  to  be  found 
to  off'set  English  debts  by  English  credits.  In  the  mind  of  prac- 
tically every  European  experienced  in  financial  matters,  is  the 
belief  that  it  is  as  impossible  for  the  Allies  to  pay  America  as  it 
now  seems  to  be  for  Germany  to  pay  the  Allies. 

The  subject  is  one  that  is  being  given  profound  consideration, 
not  only  in  those  nations  which  are  debtors,  but  in  all  other 
European  countries.  Those  countries  who  are  neither  interna- 
tional debtors  or  creditors,  see,  nevertheless,  that  their  futures  are 
involved  in  the  future  of  the  debtor  nations. 

In  view  of  these  facts,  an  investigator  of  economic  conditions 
in  Europe  must  give  much  consideration  to  the  subject  of  inter- 
government  debts.  On  the  side  of  purely  inter-Allied  obligations, 
that  is  debts  owed  by  one  European  nation  to  another,  I  do  not 
propose  to  enter.  America  may  well  keep  out  of  that  field.  It 
will  be  necessary,  however,  for  America  at  an  early  date  to  do 
some  clear  thinking  in  regard  to  the  obligations  of  the  Allies  to 
our  government,  amounting  as  they  now  do  to  $11,000,000,000. 
To  this  subject  I  have  given  a  great  deal  of  consideration.  I  have 
discussed  it  with  the  leading  responsible  government  ministers  and 
financiers  of  Europe.    My  conclusions  are  these: 


i;i;i| 


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23 


So  far  as  America  is  concerned  we  should  do  nothing  which 
will  stimulate  quibbling  as  to  the  basic  fact  of  the  obligations. 
We  loaned  American  dollars.  They  were  raised  under  the  greatest 
pressure  from  our  people.  It  was  at  the  time  regarded  by  no  one 
as  part  of  our  war  contribution.  That  contribution  was  made  in 
full  measure  and  in  ample  amounts  when  we  spent  directly,  as  we 
did,  $18,000,000,000,  and  when  we  moved  2,000,000  men  over 
3,000  miles  of  water  to  the  battlefields.  The  loans  are  matters  of 
honor  between  our  associates  and  the  Treasury  of  the  United 
States.  At  the  time  these  loans  were  made,  not  the  slightest 
suggestion  was  raised  casting  doubt  as  to  the  nature  of  the  ob- 
ligations which  were  created.  They  were  unequivocable  obliga- 
tions to  repay.  I  believe  we  should  repulse  with  vigor  any  sug- 
gestion on  the  part  of  our  Allies  that  these  advances  were  not 
actually  loans.  I  believe  that  we  should  sharply  repel  any  theory 
that  these  loans  were  contributions  toward  the  enemy's  defeat, 
and  were  only  ostensibly  in  a  form  contemplating  repayment. 

Another  consideration,  somewhat  apart  from  the  question  as 
here  stated,  has  to  do  with  the  effect  on  future  financial  relations 
which  would  result  from  repudiation  by  European  powers  of  their 
obligations.  America  for  many  years  to  come  will  be  the  sole 
world  reservoir  of  capital.  If  our  first  great  adventure  in  granting 
international  credit  were  to  have  the  unhappy  conclusion  of 
repudiation  by  our  debtors,  that  reservoir  of  capital  will  be  sealed 
in  the  future  to  any  further  flow  in  the  direction  of  Europe.  It 
would  be  inconceivable  that  American  investors,  should  they  find 
that  foreign  obligations  are  so  lightly  regarded  as  to  be  repudiated 
when  their  payment  becomes  onerous,  will  again  go  into  their 
pockets  to  find  funds  for  future  international  loans.  That  is  a 
point  to  which  European  debtors  may  well  give  thought.  In  the 
rehabilitation  of  Europe  there  will  be  need  for  American  capiul. 
No  action  should  be  now  taken  by  European  nations  which  will 
cut  them  off  from  their  only  important  source  for  the  future  sup- 
ply of  international  loans. 

I  should  then  lay  down  as  the  first  postulate  the  principle  that 


the  allied  debt  is  a  just  debt,  legally  and  morally,  and  whether  it 
can  be  paid  or  not,  it  should  be  frankly  acknowledged  as  a  just 
debt. 

Then  comes  quite  a  different  point  to  consider.  What  would 
be  the  effect  upon  America  if  this  debt  were  acknowledged  and 
paid?  The  merest  tyro  in  international  economics  now  under- 
stands that  large  international  obligations  can  only  be  discharged 
by  paying  in  goods.  It  is  true  that  small  balances  may  be  settled 
by  the  payment  in  gold;  that  pressing  obligations  may  be  con- 
verted into  funded  debts  running  over  a  long  period;  it  is  con- 
ceivable that  a  diebt  owed  by  one  nation  to  another  might  be 
converted  into  the  ownership  of  properties  or  investments  ac- 
quired by  the  nationals  of  the  creditor  country  from  the  nationals 
of  the  debtor  country.  Broadly  speaking,  however,  obligations 
running  into  such  amounts  as  are  contemplated  in  the  German 
indemnity  and  in  the  figures  of  the  European  international  debts 
can  only  be  discharged  by  the  payment,  directly  or  indirectly,  in 
goods. 

If  that  is  admitted  it  may  well  give  us  pause  while  we  consider 
the  effect  upon  our  industrial  life  of  a  situation  and  policy  which, 
if  carried  to  a  logical  conclusion,  may  result  in  the  influx  into  the 
United  States  of  a  heretofore  undreamed  of  total  of  foreign  im- 
portations of  competitive  goods.  It  will  not  do  for  us  to  erect 
tariff  barriers  against  such  an  influx,  if  we  admit  that  it  is  only 
by  the  inflow  of  goods  that  the  debts  can  be  paid.  We  must  make 
up  our  minds  to  receive  the  goods,  and  in  receiving  them  accept 
the  consequences. 

The  full  consequences  would  be  profound  if  the  payments  could 
be  made  and  were  made  with  any  degree  of  promptness.  We 
need  not  look  further  than  to  contemplate  merely  the  receipt  of 
$500,000,000  a  year  of  interest.  If  that  came  in  the  form  of 
goods,  our  industrial  situation  would  be  upset  in  a  way  and  to  an 
extent  we  have  not  heretofore  experienced.  The  effect  upon  our 
labor  situation  and  the  consequent  social  problems  which  would 
be  raised,  would  be  menacing. 


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ADDRESS  OF  MR.  FRANK  A.  VANDERLJP 


25 


In  the  end  we  would  be  hurt,  I  am  inclined  to  believe,  as  much 
by  the  rapid  receipt  of  payment  in  the  form  of  goods  as  our 
debtors  would  be  harmed  in  making  the  payment. 

It  would  appear  then  that  we  had  erected  a  paradox,  if  we 
take  this  view  of  the  situation.  To  insist  that  the  debts  are  just 
ones  and  should  be  paid,  but  to  admit  that  the  receipt  of  payment 
would  be  disastrous  to  us,  and  therefore  should  be  avoided,  is  an 
apparent  contradiction.  That  view  must  be  considered  apart 
from  any  question  as  to  the  ability  of  the  debtors  to  pay. 

If  they  cannot  pay,  it  may  well  be  said  that  there  would  be 
small  use  in  insisting  upon  a  "Confession  of  Faith." 

If  they  can  and  do  pay,  one  is  left  with  the  belief  that  debtor 
and  creditor  will  alike  be  seriously  harmed.  What  is  to  be  done 
with  such  a  paradox? 

In  some  quarters  in  America  I  find  a  disposition  to  meet  the 
situation  in  this  way.  Feeling  a  growing  apprehension  that  our 
debtors,  or  at  least  most  of  them  are  insolvent,  it  is  admitted  that 
the  cancellation  of  the  debt,  or  at  least  its  scaling  may  be  in- 
evitable. There  is,  therefore,  a  groping  for  some  point  of  advan- 
tage to  be  gained,  against  the  disadvantage  of  enforced  cancella- 
tion. If  cancellation  is  inevitable,  whatever  our  opinion  of  the 
justice  of  the  claim  may  be,  it  is  asked  if  there  is  not  some  better 
way  than  merely  to  wipe  out  the  debt.  If  we  should  wipe  out 
the  debt  we  may  be  sure  that  our  late  debtors  will  show  very 
little  appreciation.  They  will  in  many  cases  feel  that  we  have 
been  slow  about  taking  an  inevitable  action.  Some  of  our  people 
who  hdd  the  view  that  we  should  exact  some  advantage  in  return 
for  cancelling  the  debt  still  have  a  large  measure  of  altruism  in 
their  attitude  toward  the  situation.  Others  give  it  quite  practical 
consideration.  But  all  unite  in  feeling  that  prosperity  in  America 
is  largely  related  to  prosperity  in  Europe.  They  agree  that  our 
interests  are  firmly  bound  up  with  the  future  of  European  civili- 
zation. 

There  is  a  feeling  on  the  part  of  those  who  would  exact  some- 
thmg  in  return  for  cancellation,  that  Europeans  have  generally 


badly  mismanaged  their  affairs;  that  Europe  has  brought  upon 
herself,  and  upon  the  world,  profund  confusion.  They  believe 
that  we  have,  in  the  Allied  obligations,  a  certain  amount  of  ad- 
vantage, even  though  it  is  admitted  that  these  debts  are  an  un- 
certain instrument  of  power.  They  argue  that  if  we  must  forego 
payment  the  least  we  might  get  for  the  cancelling  of  past  debts 
is  some  guarantee  of  better  future  behavior.  So  it  has  occurred 
to  many  people  to  wonder  if  it  will  not  be  possible,  instead  of 
blankly  surrendering  our  $11,0CX),000,000  to  surrender  the  debt 
conditionally, — to  surrender  it  only  against  some  guarantee  that 
in  the  future  European  behavior  will  be  improved,  to  the  end 
that  European  civilization  may  be  rescued  from  the  grave  dangers 
which  it  is  facing. 

A  project  such  as  this  needs  examination  of  the  conditions 
which  might  conceivably  be  proposed  as  prerequisites  for  can- 
celling the  debt.  That  leads  to  an  enquiry  in  some  detail  as  to 
just  how  Europe  is  now  misbehaving.  It  raises  the  question  as 
to  whether  or  not  it  is  conceivable  that  the  particular  nations 
owing  us  can  now  give  guarantees  which  would  be  of  value  for 
future  good  behavior. 

The  first  thought  in  such  an  enquiry  would  probably  be 
directed  toward  a  reduction  of  excessive  armaments.  There  is 
naturally  an  obstacle  in  the  way  of  our  showing  complete  sympa- 
thy with  France,  for  example.  It  will  be  difficult  to  agree  to  the 
cancelling  of  France's  debt  to  America,  while  France  is  of  her 
present  mind  and  continues  to  maintain  an  army  of  seven  to 
eight  hundred  thousand  men. 

Let  us  examine  then  the  suggestion  of  proposing  to  France  a 
remission  of  our  war  indebtedness  claim  provided  France  will  in 
turn  substantially  reduce  her  military  expenditure. 

Her  answer  will  undoubtedly  be:  "Yes,  we  will  gladly  reduce 
our  military  expenditure  to  any  point  you  name,  provided  you 
in  turn  guarantee  our  national  integrity.*' 

France  might  feel,  with  a  good  deal  of  reason,  that  we  should 
agree  with  her  that  it  would  be  national  folly  for  her  to  reduce  the 


ill  I 


THE  ECONOMIC  CLVB  OF  NEW  YOBK 


ADDRESS  OF  MS.  FRANK  A.  YANDERLIP 


27 


l! 


strength  of  her  army,  unless  she  first  obtains  some  outside  guar- 
antee for  her  future.  France  is  neighbor  to  a  far  larger  nation 
which  to  a  man  now  feels  that  it  has  been  unjustly  treated  Ger- 
many may  be  ever  so  war-sick  at  the  moment,  but  it  is  not  only 
conceivable,  it  is  quite  probable,  that  the  day  wiU  come  when 
Germany  will  seek  by  force  to  retrieve  losses  imposed  by  what  she 
believes  to  be  a  thoroughly  unjust  treaty  of  peace. 

If  we  found  that  the  reduction  of  armanente  in  France  could 
not  be  purchased,  not  alone  by  the  remission  of  the  indebtedness 
of  France  to  us,  but  that  we  must  in  addition  pay  with  a  guarantee 
which  will  insure  France  from  future  invasion,  pay  in  a  guaran- 
tee that  the  national  integrity  is  to  be  permanently  upheld  we 
might  as  well  regard  the  cost  of  her  reduction  in  armaments,  if 
purchased  at  that  price,  as  footing  too  much. 

What  then  is  a  further  bill  of  particulars  of  European  misbe- 
havior that  we  might  make  up.'  At  least,  what  other  misbehavior 
IS  there  that  any  of  our  debtor  nations,  should  they  have  the  pur- 
pose, could  themselves  correct  and  could  guarantee  permanently 
to  stand  corrected,  in  return  for  our  surrendering  our  debt? 

I  assume  that  in  any  proposal  of  this  type  we  would  be  aiming 
at  general  European  recovery.  One  of  the  obstacles  in  the  way 
of  such  general  recovery  is  that  extent  and  the  terms  of  the  claims 
of  the  Allies  for  reparations.  These  claims  may  be  far  too  small 
to  offer  material  compensation  for  the  damage  which  Germany  has 
caused;  nevertheless  they  are  far  too  large  to  make  it  conceivable 
that  Geririany  can  pay  them. 

I  put  to  one  of  the  most  distinguished  English  statesmen  of  the 
presfent  day  this  general  problem  of  war  cancellation.  I  asked 
him  what,  m  his  opinion,  we  ought  to  ask  for  cancelling  our  claims 
agamst  the  Allies,  as  he  strongly  felt  we  should  do.  His  reply 
showed  the  objectivity  of  the  British  mind.  In  America  we  seem 
still  to  be  nearer  to  the  War  than  England.  If  an  American  were 
to  propose  what  this  English  statesman  did  propose,  it  would  lay 
him  open  to  attack  as  being  pro-German,  and  to  charges  that  he 
was  a  paid  German  propagandist,  and  yet  the  sUtesman  who 


made  the  proposal  was  as  high-minded  and  righteous  a  man  as 
can  be  found  in  the  British  Empire. 

This  proposal  was  that  the  American  government  should  say 
to  the  Allies  that  the  Allied  indebtedness  will  be  cancelled  pro- 
vided the  Allies  will  in  turn  reduce  by  the  same  amount  tiieir 
demands  upon  Germany  for  indemnity. 

Such  a  proposal  seems  to  me  to  be  one  that  proceeds  without 
sound  principle  to  escort  it.  If  the  indemnity  is  too  high,  if  its 
terms  are  impossible  of  fulfillment,  the  Allies  have  it  quite  within 
their  power  to  reduce  it.  No  more  futile  proposal  could  be  made  to 
America  from  a  political  point  of  view  than  to  suggest  the  pur- 
chase by  the  cancellation  of  our  debt  of  a  reasonable  attitude  on 
the  part  of  the  Allies  toward  Germany.  It  would  be  to  purchase 
something  which  is  obviously  in  the  interests  of  the  Allies  to 
adopt;  failure  by  the  Allies  to  adopt  such  a  course  promises  to  be 
followed  by  such  contagious  financial  decay  that  the  Allies  must 
act  promptly,  or  quickly  feel  the  heavy  weight  of  the  conse- 
quences. Why  then  should  we  purchase  this  wiser  attitude  at  the 
expense  of  cancelling  our  just  claims. 

Recasting  the  terms  of  the  indemnity  would  undoubtedly  be  a 
helpful  factor  in  European  recovery.  The  objection  to  the  in- 
demnity as  it  is  now  laid  is  a  double  one.  First,  the  indemnity  is 
larger  than  Germany  can  conceivably  pay.  The  consequences  of 
such  a  burden,  if  the  Allies  persisted  in  binding  it  upon  her 
shoulders,  will  be  a  financial  debacle.  Financial  breakdown  in 
Germany  will  inevitably  involve  other  countries  in  Europe. 

The  other  evils  that  follows  from  the  present  terms  of  the 
indemnity  attaches  directly  to  the  allied  creditors.  So  far  as 
payment  is  made  it  is  bringing  disturbance  into  their  domestic 
industrial  life.  That  applies  particularly  to  England.  Only  a 
fraction  of  the  indemnity  is  payable  to  England,  but  she  experi- 
ences to  the  full  the  false  conception,  in  which  Germany  is 
forced  to  engage,  in  order  to  provide  the  equivalent  of  gold 
payments  which  the  terms  of  the  London  Conference  compel  her 
to  do. 


>> : 


u 


JL:i 


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ADDRESS  OF  MR.  FRANK  A.  VANDERLIP 


29 


tlllil 


'\- 


'f  \\ 


?^l 


ll||  l!l!| 


11 


I  should,  then,  certainly  reject  such  a  point  in  a  bill  of  par- 
ticulars of  Europe's  misbehavior.  We  should  leave  to  the  Allies 
themselves  the  readjustment  of  their  claims  upon  Germany,  and 
not  undertake  to  purchase  by  the  cancellation  of  our  debt  a  wiser 
and  more  reasonable  attitude  of  the  victors  to  the  vanquished. 

It  is  quite  clear  that  we  should  also  reject  a  possible  corollary 
of  such  a  theorum.  Under  no  circumstances  should  we  become 
the  Allies'  collection  agent,  and  trade  our  claims  for  the  uncertain 
claims  which  the  Allies  have  imposed  upon  Germany. 

If  we  examine  one  after  another  the  possibilities  for  making 
out  such  a  bill  of  particulars  of  misbehavior  as  I  have  suggested, 
if  we  undertake  to  find  ways  in  which  we  might  direct  European 
political  policy  under  the  threat  of  enforcing  our  financial  claim, 
or  under  the  bribe  of  relinquishing  it,  I  believe  we  would  find  this 
whole  field  of  exploration  a  fruitless  one.  Any  attempt  seriously 
to  enter  it  would  result  in  involving  us  in  meddling  with  European 
political  policy.  To  become  so  involved  is  opposed  to  every 
American  national  sentiment.  I  should  abandon,  then,  the 
theory  that  we  might  cancel  the  aUied  indebtedness  in  exchange 
for  the  privilege  of  imposing  certain  rules  of  political  conduct 
upon  our  debtors. 

I  should  likewise  reject  at  once,  and  with  vigor,  the  suggestion 
that  in  exchange  for  cancellation  we  ask  to  be  given  certain  trade 
concessions,  that  we  demand  special  commercial  privileges.  The 
genius  of  our  foreign  policy  has  long  been  the  open  door,  equal 
rights,  a  fair  field;  if  we  should,  through  the  cancellation  of  this 
indebtedness  buy  special  privileges  for  our  commerce,  if  we  should 
obtain  discriminatory  treatment  favorable  to  American  business, 
we  would  buy  something  which  we  ought  not  to  have,  and  some- 
thing which  would  in  the  end  plague  us  infinitely  more  than  it 
would  ever  prove  to  our  advantage. 

The  paradox  then  persists.  I  would  have  the  Allies  acknowl- 
edge the  justice  of  the  debt,  and  would  insist  upon  its  payment; 
and  at  the  same  time  I  would  recognize  that  its  payment  in  goods 
would  bring  about  such  confusion  in  our  domestic  aflFairs  that  we 


will  be  more  harmed  by  its  receipt  than  we  will  be  to  forego  it. 

What  then  shall  be  done?  Is  there  some  way  in  which  the 
integrity  of  national  promises  may  be  kept,  some  way  in  which 
our  faith  in  national  obligations  may  be  left  unshaken,  some  plan 
under  which  our  future  international  relationships  may  not  be 
darkened  by  repudiation?  Can  we,  while  accomplishing  those 
objects,  at  the  same  time  avoid  the  consequences  on  the  one  hand 
of  ruining  our  debtors,  and  the  danger  on  the  other  hand  of 
ruining  ourselves? 

All  that  is  possible.  America  can,  if  she  will,  shrewdly  choose 
the  road  out  of  this  difficulty.  Such  a  road  would,  I  believe,  lead 
to  greater  material  gain  for  civilization  in  general  while  for 
America  it  will  lead  to  a  great  moral  and  vast  material  gain. 

For  America  it  will  mean  the  most  substantial  material  advan- 
tage that  has  ever  flowed  from  any  single  political  act.  More  im- 
portant than  the  material  gain — ^however  immeasurably  great  that 
would  be — ^there  would  be  spiritual  gain  which  would  give  us  a 
moral  leadership  so  far-reaching  that  the  responsibility  of  it 
should  make  us  humble  rather  than  vainglorious. 

I  repeat  that  I  would  demand  the  full  acknowledgment  of  this 
debt.    It  is  a  just  debt,  and  ought,  if  possible,  to  be  paid. 

Next  I  would  want  America  to  be  both  an  intelligent  and 
lenient  creditor.  Terms  of  payment  ought  to  be  adapted  to  the 
means  of  our  debtors.  In  that  respect  we  shouM  take  the  action 
of  the  Allies  in  fixing  the  terms  of  the  indemnity  as  an  example  to 
be  avoided  rather  than  followed. 

The  crux  of  my  plan  would  lie  in  the  disposition  of  the  pay- 
ments. 

I  would  have  America  make  a  beau  jeste,  a  grand  gesture  in 
international  relationships.  While  demanding  that  the  payment 
be  made,  I  would  have  America  say  that  she  is  prepared  for  the 
present  to  forego  the  receipt  of  it.  That  is  how  the  consequences 
of  the  paradox  may  be  avoided. 

What  then  shall  we  do  with  it?  I  would  like  to  see  every 
dollar  that  can  ever  be  paid  to  us  by  our  debtors  for  years  to  come 


I 


•3SCI 


30 


THE  ECONOMIC  CLUB  OF  NEW  YORK 


M. 


y^j 


devoted  to  the  rehabilitation  of  European  civilization.  It  is  only 
through  the  rehabilitation  of  European  civilization  that  these  debts 
can  ever  conceivably  be  paid.  It  is  only  through  the  rehabilitation 
of  European  civilization  that  America  can  ever  conceivably  realize 
in  full  measure  her  destiny,  or  can  expect  a  full  measure  of 
prosperity  for  our  people. 

What  do  I  mean  by  this  generalization  about  the  rehabilitation 
of  European  civilization?  Why  do  I  believe  that  America  has 
the  special  wisdom  which  will  warrant  her  undertaking  such  a 
work  whatever  it  is?  Why,  if  Europe  is  indirectly  to  pay  the  bill 
herself,  should  she  not  be  left  alone  to  handle  in  her  own  wisdom 
the  problem  of  reconstructing  European  civilization? 

Let  us  examine  these  questions.  By  undertaking  to  rehabilitate 
European  civilization  I  mean  in  the  first  instance  that  I  would 
bring  a  spirit  into  the  affairs  of  distressed  Europe  which  would 
promise  a  revival  of  hope,  a  renewal  of  courage,  a  stimulation  of 
industry. 

There  is  today  a  pall  of  cynicism,  of  national  hatred,  and  of 
disbehef  m  the  sincerity  of  friend  and  foe  alike,  which  make  the 
start  towards  rehabilitation  almost  impossible. 

Towards  the  close  of  the  War,  President  Wilson  put  into  words 
of  high  spiritual  meaning  the  very  essence  of  the  best  of  American 
aspirations  of  peace.  His  words  influenced  all  Europe  with  a 
passionate  hopefulness  that  there  had  come  into  the  world  of 
international  relationships  a  new  note  of  fairness  and  goodwiU 
Such  a  wave  of  idealism  swept  through  the  common  people  of 
Europe  as  had  never  before  been  witnessed  in  all  history 

Those  ideals  were  hopelessly  crushed  at  Paris.  Not' one  of 
them  remamed  when  the  treaties  were  written,  and  Europe  fell 
back  into  something  far  worse  than  its  old-time  cynicism.  The 
voice  of  America,  uttering  beautiful  doctrines  of  brotherhood 
through  its  chief  magistrate,  sounded  to  Europe  like  a  sacred 
gospel;  and  then  America,  along  with  her  associates,  abandoned 
that  gospel.  Hope  turned  into  despair,  belief  into  cynicism,  and 
faith  was  burned  up  in  new  fires  of  racial  hatreds.  It  is  a  common- 


ADDRESS  OF  MR.  FRANK  A.  VANDERLIP 


31 


place  to  say  that  the  greatest  opportunity  to  benefit  humanity 
that  ever  came  to  any  man  lay  at  one  moment  in  the  hands  of 
Woodrow  Wilson.  The  opportunity  passed.  Hopes  were  not 
realized. 

Today  that  same  opportunity  lies  at  the  feet  of  America  as  a 
nation.  Its  fate  no  longer  rests  in  the  hands  of  one  individual; 
it  is  the  responsibility  of  a  whole  people.  Having  in  our  hands 
the  opportunity  to  do  an  incalculable  service  to  mankind  it  re- 
mains to  be  seen  whether,  as  a  nation,  we  will  rise  to  that  oppor- 
tunity, whether  we  will  perform  the  service  that  is  before  us,  or 
whether  as  a  nation  we  too  shall  fail. 

Let  us  now  soberly  examine  what  it  is  that  we  might  do. 

Large  sections  of  Europe  are  backward,  judged  by  our  stand- 
ards. Backward  though  they  may  be,  they  are  bursting  with 
latent  possibilities  for  development.  A  study  of  eastern  Europe 
has  aroused  in  my  mind  a  vivid  program.  I  believe  a  plan  for 
the  development  of  eastern  Europe  could  be  laid  out  which 
might  well  be  compared  to  the  vision  our  forefathers  had  when 
the  latent  possibilities  of  our  great  West  were  unfolded  to  their 
minds. 

I  do  not  mean  that  eastern  Europe  is  a  wilderness.  In  oppor- 
tunity for  development  it  is  vastly  richer  than  any  wilderness. 
There  is  everything  at  hand  there  except  education,  economic 
organization,  the  aplication  of  enlightened  methods  to  production, 
and  the  harmonizing  of  blind  racial  antagonisms. 

Everything  the  War  has  cost,  everything  an  unwise  peace  is 
costing,  can  be  recompensed,  and  beyond  that  a  great  economic 
margin  created,  if  eastern  Europe  can  be  put  in  order,  can  be 
helped  and  led  wisely  to  handle  its  own  problems,  if  the  peoples 
of  eastern  Europe  can  be  made  to  comprehend  their  economic 
unity,  if  they  can  be  brought  to  understand  that  in  the  welfare 
of  all  nations  lies  the  highest  prosperity  of  each. 

You  may  ask  how  can  I  soberly  imagine  that  America  can 
largely  contribute  toward  that  end,  suppose  she  had  in  hand,  and 
was  ready  to  devote  to  such  a  purpose,  the  interest  and  principal 


!     '' 


■iife»*- 


ill 


32 


THE  ECONOMIC  CLUB  OF  NEW  YORK 


iV\ 


aW  !ll   K  t"-     ^''"  "  *"  '""^  ^^^^  be,  it  would, 

after  aU,  be  small  compared  to  what  Europe  is  already  spending 
for  government.  How  then  is  it  likely  that  we  could  make  much 
of  an  impression  upon  European  civilization,  even  with  such  a 
sum  wisely  spent? 

the^St' ''  ^^Tr^''''  "'"  ^'^"'^^^  ^  ^'«  ^^^^d  and  time, 
they  find  it  impossible  to  make  expenditures  for  those  very  ob- 
jects which  would  be  of  the  greatest  possible  value  in  imping 
mhzauon.    Moved  as  we  are,  governed  as  we  are,  it  is  possibk 

fre  T2\'\  ""'  ^?^  '^"^'^""  ^"^^  ^"-^'  P^--ded  those  sums 
are  devoted  to  certam  purposes.  Without  much  grumbling  a 
nation  will  tax  itself  to  build  at  frequent  intervals  a  WOOO,bOO 

a  S>tl.  ''^  ''''''  ^"  "PP^^^  '  '''''  --y'  ^-  --tain 

a  too  numerous  civil  service.     As  a  matter  of  course  European 

nations  tax  themselves  vast  sums  to  pay  for  the  costs  of  past 

war     and  to  provide  agamst  the  possibilities  of  future  wars 

th^^llTT  ""f  "^^  ""'"^'''^  ^^"^^'  ^P^^^  ^^-^y  ^^  those 
hings  which  have  furnished  the  chief  items  of  national  budgets 

for  a  thousand  years,  it  will  at  the  same  time  refrain  from  doing 
an  endless  number  of  things  which,  if  done,  would  profoundly 
affect  for  the  better  the  nation's  future,  an.  profoundly  influent 
for  the  better  the  course  of  civilization. 

Most  of  such  admirable  projects  are  now  left  to  be  worked  out 
m  a  puny  way  by  an  occasional  philanthropist,  or  the  more 

aw^k    "^      '"'''"  "f  °°'-    ^"^""^  ^''^  ^^^  -P-ience  and 
awakened  imagination  knows  that  it  would  be  possible  to  make 

expenditures  of  a  character  now  rarely,  if  ever,  sanctioned  by  the 

tax  payer  the  return  upon  which,  in  terms  of  the  welfare  of  man- 

orlTe  .      ^^^^"^t'll"  ^"^^"  ^'^'^  ''  ^^^  -turn  from  most 
of  the  objects  upon  which  government  incomes  are  lavished 

It  IS  to  such  a  program  that  I  would  devote  for  many  years 
every  dollar  that  we  can  get  of  this  debt. 

I  believe  if  the  money  was  thus  wisely  expended,  one  of  the 
results  would  be  such  marked  economic  impr^emen't  in  Europe 
that  m  time  every  dollar  of  these  debts  could  be  paid.    Although 


ADDRESS  OF  MR.  FRANK  A.  VANDERLIP 


33 


our  claim  would  for  a  time  have  been  expended  without  coming 
directly  to  us,  the  indirect  result  of  the  expenditure  would  many 
times  over  materially  compensate  us  for  the  direct  loss.  It  is 
now  a  claim  we  are  never  likely  to  realize,  or  at  least  to  realize  in 
but  small  measure.  If  we  would  relinquish  our  claim  to  its 
receipt,  if  we  would  spend  with  purposes  of  high  nobility  what 
was  paid  us,  we  would  indirecdy  get  it  ^11,  and  much  more  than 
all.    Ultimately  we  would  get  it  in  fact. 

If  such  a  program  as  is  here  indicated  were  undertaken  I  would 
hope  that  little,  if  any,  of  the  funds  would  be  expended  in  strictly 
welfare  work.  The  last  thing  we  ought  to  do  is  to  pauperize 
anyone.  There  is  still  perhaps  some  welfare  work  that  will  have 
to  be  done,  but  in  the  main  the  expenditure  should  be  made  with 
great  vision  of  the  future,  rather  than  as  a  palliative  to  ease  the 
distress  of  the  moment. 

There  is  a  situation  at  present  in  Europe  in  which  the  old 
machinery  of  commerce,  by  means  of  which  goods  were  inter- 
changed, and  the  life  of  Europe's  vast  population  made  possible, 
is  now  so  out  of  gear  that  a  resumption  of  old  commercial  rela- 
tionships promises  at  the  very  best  to  be  but  slowly  brought 
about.  Those  old  relationships  must  promptly  be  resumed,  or 
much  of  what  we  call  the  civilization  of  Europe  will  perish.  One 
of  my  first  concerns  would  be  to  help  to  do  that;  but  helping  to 
put  in  order  the  old  machinery  of  commerce  would  not  be  enough, 
nor  would  that  accomplishment  be  really  the  ultimate  aim. 

A  considerable  part  of  what  we  received  might  well  be  used  as  a 
revolving  fund  of  credit.  It  could  be  loaned  to  nations  to  help  them 
accomplish  specific  purposes,  purposes  which  we  had  carefully  ana- 
lysed and  believed  to  be  economically  sound  and  for  the  general 
good,  purposes  which  would  accomplish  substantial  and  perma- 
nent economic  and  social  results.  The  funds  so  loaned  could  in 
time  be  repaid;  if  the  purposes  for  which  they  had  been  used  were 
economically  sound  they  could  be  repaid  without  difficulty,  and 
could  then  be  similarly  reloaned  over  and  over  again  and  ulti- 
mately paid  back  to  us. 


i^^k 


^'^ro^J'^' 


34 


THE  ECONOMIC  CLUB  OF  NEW  YORK 


ADDRESS  OF  MR.  FRANK  A.  VANDERLIP 


35 


■V.  < 


E,5nn^  Z  "'*'  transportation.  We  could  help  provide  it 
Europe  needs  a  great  development  of  its  ample  hydroel«:tric 
power  m  order  that  it  may  have  cheaper  motive  power,  ^^" 
econom.^e  ,ts  far  too  small  fuel  supply.  We  coufd  aid  irrnitiat- 
mg  such  projects.  There  are  cities  in  eastern  Europe  that  need 
better  systems  of  sanitation.  Such  provision  would  be  of  grt« 
economic  .mportance.    We  could  give  impetus  to  it  ^ 

po  tirifT'""^' J,-''""'''  1-y  before  you  a  much  fuller  ex- 
posmon  of  the  poss.b.hues  of  economic  development.  I  would 
emphasize  what  might  be  done  for  Italy  and  Austria  n  develop^ 
■ng  great  hydro-electric  possibilities     If  we  to«lr  „nl„    •     ^^^°^, 

:l'Z  £Z-^  »"--  •  •»-  — ^ T.rs:^ 

If  we  would  devote  the  income  for  a  few  months  toward  equio- 
would  have  conferred  a  material  blessing  on  eastern  oeasantT,! 

721  Zrr    '"'•^'    ^'^-""'"'"^    Production^rrv 
of?ommer«        '"'  '°  '""  ^^''^^"^  '''''''  -*°  »  -"t  stream' 

of'ilfrectpttT.i:  "';  "'T  ""'"  ^''  ''«^*-  ^'  — 

debt  aTd  sho    d  b^pa'^"  A   Z "'JT    ^f  '!^''^*  "^  i"« 
debtors  cease     TT..  A-  ,   .  ^  '°*  °"'  '*'"■*'"«  ^^^h  the 

aebtors  cease.    The  expenditure  of  the  money  we  received  should 
be  made  where  and  how  we  wiIIaH     i»,  j-      ""'"^^  snouia 

affair  n^,  »k      a-     ,   ^^  ^'"*<*-    It*  expenditure  wou  d  be  our 
altair,  not  the  affair  of  the  debtors. 

Some  part  of  what  we  received,  however,  would  probablv  be 
spent  without  possibility  of  direct  return,  if  such  exS^diture! 
were  wisely  made,  d,e  indirect  return  would  be  enormo^  ^e " 
nr  W  1"""."*°  "  *""°"*'  P^°^P''«"'  °f  what  might  be  accom! 

the  most'f       "'"  T""^  °'  *''«»'«»  '^  y«"  w'hich  w<^Td  be 
the  most  fascmatmg  financial  document  that  was  ever  prepared 


Admitting  for  the  moment  the  possibility  of  devising  a  sound 
and  wise  plan  for  such  expenditures  in  Europe,  expenditures  so 
well  calculated  that  they  would  bring  quickly  the  blossoms  of 
^  promise,  and  later  the  fruit  of  fulfillment  to  European  civilization, 
you  may  still  ask  why  do  I  think  that  America  has  the  wisdom, 
the  experience,  the  temperament,  the  freedom  from  unwise  politi- 
cal interference  which  would  warrant  the  hope  that  we  could, 
even  with  the  best  motives  in  the  world,  successfully  conduct  such 
a  great  experiment. 

A  most  impressive  reason  for  believing  this  to  be  within  the 
range  of  possibility  can  be  pointed  out.  It  is  the  work  which 
Americans  have  done,  and  are  doing  in  Europe.  I  have  seen 
something  of  that  work  this  year.  I  have  studied  with  care  in 
many  countries  the  administrative  ability  which  our  countrymen 
are  showing,  and  I  have  rarely  seen  anything  that  made  me 
prouder  of  being  an  American. 

I  know  something  of  the  work  which  the  American  Relief 
Administration,  operated  under  Mr.  Hoover's  direction  accom- 
plished. I  have  met  many  of  the  men  who  are  doing  that  work. 
It  is  a  small  staff,  but  it  is  made  of  as  capable  a  group  of  vigorous, 
efficient  and  high-minded  men  as  were  ever  brought  together  for 
a  common  purpose. 

While  the  work  which  has  been  done  by  a  number  of  American 
organizations,  such  as  the  Red  Cross,  the  Y.  M.  C.  A.,  the 
Quakers  and  the  Near  East  Relief  is  quite  different  work  from 
that  which  I  would  hope  to  see  undertaken  under  this  program, 
the  character  of  management  of  these  organizations,  the  ability 
which  they  have  displayed  in  working  with  foreign  people  and 
training  them  to  a  large  degree  of  self-helpfulness  leads  me  to 
have  great  confidence  in  the  American  genius  for  work  in  foreign 
fields.  I  would  not,  by  any  means,  have  the  work  which  these 
organizations  have  been  doing  duplicated  under  this  program  but 
I  would  feel  confident  that  the  type  of  work  which  I  have  in  mind 
could  be  accomplished  with  as  signal  success  as  has  been  the 
other  type  of  work  which  Americans  have  been  doing  in  Europe. 


il 


36 


THE  ECONOMIC  CLUB  OF  NEW  YORK 


ADDRESS  OF  MR.  FRANK  A,  VANDERLIP 


37 


\'* 


I  have  had  the  opportunity  to  observe  also  in  the  near  East  a 
work  which  has  extended  over  a  far  longer  period  than  the 
American  Relief  Administration.  It  is  a  work  less  picturesque 
than  that  done  by  some  of  the  American  organizations  working 
in  Europe  but  it  has  had  the  advantage  of  time  to  prove  its  sound- 
ness. I  refer  to  the  results  accomplished  by  such  institutions  as 
Robert  College  and  the  Woman's  College  at  Constantinople,  as 
well  as  to  the  general  educational  activities  of  various  American 
religious  groups,— activities,  I  may  add,  that  have  risen  far  above 
a  desire  for  religious  proselyting,  activities  in  which  men  and 
women  have  whole-heartedly  given  themselves  to  service,  and 
have  had  for  their  aim  the  sound  building  up  of  human  character, 
and  have  been  very  little  hampered  by  eflForts  to  propagate  doc- 
trinal beliefs. 

No  one  can  travel  through  the  near  East  and  meet  the  men 
who  are  today  responsible  for  the  administration  of  aflfairs  with- 
out in  the  first  place  being  impressed  by  the  number  of  such  men 
who  are  graduates  of  Robert  College;  and  then  further  being 
enormously  impressed  with  the  profound  influence  which  the 
training  in  such  a  college  of  a  comparatively  few  men  has  accom- 
plished in  the  political  and  social  life  of  the  Near  East.  It  is  no 
overdrawn  statement  to  say  that  the  most  potent  single  influence 
for  good  in  Near  Eastern  affairs  can  be  directly  traced  to  the 
invigorating  spirit  of  sound  manhood  which  has  emanated  from 
Robert  College.  I  saw  evidences  of  this  in  every  country  in  the 
Balkans. 

It  may  be  answered  that  such  influence  has  not  yet  brought 
about  a  millenium,  and  that  is  true;  but  it  has  certainly  saved 
millions  of  people  from  immeasurably  more  unhappy  conditions 
than  those  which  they  have  actually  encountered. 

If  I  single  out  Robert  College  it  is  only  because  I  saw  more 
first-hand  evidence  of  its  influence.  In  its  way,  Constantinople 
College  has  performed  the  same  sort  of  service,  and  I  have  no 
doubt  that  other  American  institutions  of  learning, — and  there 
are  some  thirty  now, — have  had  considerable  careers  of  usefulness. 


All  the  way  from  the  Baltic  to  the  Black  Sea,  in  Poland,  Czecho- 
slovakia, Hungary,  Yugo-Slavia,  Bulgaria  and  Turkey,  there  is 
a  newly  awakened  passion  for  education.  Men  are  coming  to  see 
that  democracy  can  survive  only  if  there  are  soundly  educated 
leaders.  A  work  of  helpfulness  and  stimulation  can  be  accom- 
plished in  education;  a  work  which  will  receive  enthusiastic  sup- 
port from  these  various  nations.  They  would  cheerfully  accept 
high-minded  direction.  Such  a  work  would  cost,  in  the  light  of 
figures  we  are  now  dealing  with,  but  a  trivial  sum.  It  will  pro- 
foundly influence  the  future  course  of  civilization  in  Europe,  and 
the  future  welfare  of  the  world. 

I  do  not  believe  this  is  an  impractical  dream  but  rather  that  it 
is  a  most  materially  practical  project.  The  fruit  of  it  would  come 
to  quick  maturity.  Lessons  of  mutual  racial  respect  and  consid- 
erations are  being  learned  in  the  schools,  colleges  and  universities 
where  numerous  races,  bom  to  blind  antagonism,  are  being  edu- 
cated side  by  side.  Multiply  the  opportunity  to  learn  such  lessons, 
and  a  profound  influence  toward  softening  the  world-old  hatreds 
of  Europe  will  be  set  in  motion. 

Believing,  as  I  profoundly  believe,  that  the  real  fundamental 
solution  of  Europe's  difficulties  is  a  spiritual  one,  believing  that 
with  a  continuance  of  these  blind  racial  hatreds  peoples  must 
economically  perish,  I  am  convinced  that  to  multiply  such  institu- 
tions as  Robert  College,  and  other  equally  efficient  institutions 
with  similar  aims,  would  be  a  great  and  fundamental  step  in  the 
regeneration  of  Europe.  I  believe  too  that  America  has  men  of 
the  high  purpose  and  broad  vision  which  will  make  them  sound 
leaders  for  such  a  movement.  I  am  confident  that  enough 
work  of  this  sort  has  already  been  done  to  create  a  prestige  for 
America,  which  will  make  a  larger  effort  of  this  character  a  wel- 
come one. 

We  would  not  have  to  carry  it  on  single-handed;  we  would  only 
need  to  start,  organize  and  direct.  The  means  for  the  enlargement 
of  its  scope  and  the  adaptation  of  its  growth  to  the  national 
genius  of  the  different  countries,  would  come  from  local  sources 


38 


THE  ECONOMIC  CLUB  OF  NEW  YORK 


/?i 


K 


and  in  most  of  these  countries  there  would  arise  at  once  generous 
springs  of  local  self-helpfulness. 

All  this  is  not  merely  a  spiritual  ideal,  although  spiritual  ideals 
are,  after  all,  the  granite  rocks  upon  which  material  well-being  is 
built.  I  can  see  the  quick  economic  response  that  these  countries 
will  make  to  influences  of  this  character. 

The  effect  of  the  program  I  have  in  mind  would  not  be  confined 
to  eastern  Europe.  The  restoration  of  the  economic  stability  of 
such  countries  as  England,  the  restoration  of  the  economic  stability 
of  all  those  countries  that  have  become  so  highly  industrialized 
that  they  must  sell  the  products  of  their  labor  in  the  form  of  manu- 
factured goods  to  obtain  the  food  upon  which  their  existence  de- 
pends, lies  outside  of  themselves.  If  they  are  to  continue  to  live 
with  their  present  numbers,  they  must  have  solvent  steady  cus- 
tomers for  their  goods.  No  greater  service  could  be  done  those 
countries  nor  America  than  to  help  build  up  into  economic  sound- 
ness the  customer  nations  which  are  today  stagnating,  because  of 
mental  and  economic  backwardness,  and  racial  hatreds.  If  mar- 
kets were  opened,  industrial  nations  which  are  now  facing  star- 
vation would  quickly  be  able  to  render  a  service  to  world  society, 
against  which  the  worid  will  provide  them  with  ample  food. 

Let  us  look  at  the  matter  from  another  angle,  the  angle  of  food 
production.  No  one  who  has  travelled  in  eastern  Eurc^e  with 
open  eyes  can  avoid  the  impression  of  tremendous  latent  agricul- 
tural possibilities.  Take  the  illimitable  grain  fields  of  Roumania 
and  South  Russia,  for  example.  There  is  no  better  land  in  the 
worid.  No  lands  are  more  beautifully  adapted  to  the  possibilities 
of  almost  unlimited  improvement  of  productivity  if  scientific 
methods  and  modern  machinery  are  brought  into  play. 

These  wonderful  grain  fields  of  South  Russia,  now  plowed  in  a 
way  that  but  scratches  the  surface  by  the  diminutive  ponies,  which 
in  the  main  compose  the  working  farm  animal  population,  produce 
on  an  average  six  bushels  of  wheat  to  the  acre.  Intelligent  in- 
struction, better  seed  and  better  breedr  of  farm  animals,  the  intro- 
duction of  modern  machinery,  and  an  arrangement  by  which 


5^*.^w^:- 


ADDRESS  OF  MR.  FRANK  A.  VANDERLIP 


39 


small  holdings  are  united  under  cooperative  associations  so  that 
the  full  benefit  of  motor  driven  farm  machinery  can  be  realized, 
will  easily  result  in  producing  three  times  their  pre-war  product. 
A  work  can  be  done  in  educating  the  peasants  of  eastern  Europe 
to  better  agricultural  methods,  which  will  compensate  most  of 
the  losses  of  the  war;  to  do  that  will  require  only  a  little  capital, 
and  a  large  amount  of  high-minded  unselfish  service.  Such  an 
undertaking  as  I  propose  could  readily  accomplish  that. 

Is  this  a  plan  that  would  build  up  diflftcult  competition  for  our 
own  farmers?  Not  at  all.  It  is  a  plan  which  would  help  feed  a 
Europe  which  may  otherwise  be  but  partially  fed,  and  help  restore 
to  Europe  the  economic  power  which  will  make  her  a  greater 
customer  of  America  than  she  has  ever  been  before. 

I  would  not  plan  to  take  from  England,  France,  and  Italy,  the 
last  dollar  that  could  be  forced  from  them  to  pay  their  debt  to 
us,  and  then  spend  it  all  in  eastern  Europe,— great  as  the  indirect 
recompense  of  such  an  expenditure  would  be  in  benefiting  those 
western  nations.  On  the  other  hand,  I  would  not  presume  to 
impose  our  ideas  of  culture  upon  those  already  highly  cultivated 
nauons.  So  far  as  they  were  ready  to  accept  grants  for  purposes 
for  which  they  are,  for  the  time  being  at  least,  incapable  of  pro- 
viding by  direct  taxation,  purposes  that  they  themselves  would 
recognize  will  work  out  for  their  ultimate  great  benefit,  I  would 
let  a  portion  of  the  money  they  paid  us  be  expended  within  their 
own  borders. 

I  would  propose  to  England  the  establishment  of  great  scientific 
laboratories.  With  her  genius  for  sound  scientific  research  she 
would,  through  a  stimulation  of  technical  education  and  scientific 
investigation,  give  to  the  world  new  knowledge  of  incalculable 
value. 

I  would  give  to  Italy,  if  she  agreed  to  have  it,  the  means  for 
establishing  great  schools  of  applied  art,  so  that  the  tremendous 
genius  for  handcraft  which  the  Italian  possesses  may  be  turned 
into  channels  which  will  produce  goods  to  enrich  the  world. 

I  admit  that  it  would  be  more  difficult  to  plan  such  contributions 


40 


THE  ECONOMIC  CLUB  OF  NEW  YORK 


for  France.  I  have  memories  of  service  as  a  Dirertor  of  the 
Society  for  Aiding  French  Orphans.  France  rests  in  the  belief,— 
and  with  no  small  amount  of  sound  reason,— that  her  culture  is 
already  so  perfect  that  she  would  not  accept  such  expenditure  if 
it  came  with  a  touch  of  American  direction.  In  that  field  we  ought 
to  proceed  with  caution  and  modesty  and  good  taste;  but  even 
France  might  agree  that  some  of  the  money  she  paid  us  could,  in 
turn,  be  expended  upon  objects  in  France  that  would  work  out 
for  the  benefit  of  mankind. 

I  would  not  make  the  expenditure  on  such  a  program  as  I  am 
trying  to  outline  wholly  a  matter  of  American  direction.  Remem- 
ber there  must  be  no  relation  between  the  payment  of  the  debts 
and  the  expenditure.  The  debts  are  just  and  should  be  paid.  But 
I  would  draw  upon  the  culture,  the  training,  the  special  knowledge, 
the  high  purpose  of  the  best  of  Europeans  to  aid  in  formulating 
the  program  and  in  administering  it,  always  keeping  the  control  of 
the  situation,  however,  in  our  own  hands,  for  it  would  be  our 
money  that  was  being  expended. 

How  to  administer  such  a  trust  as  I  am  suggesting,  would  form 
a  chapter  too  long  to  include  in  this  outline.  Perhaps  I  can  visu- 
alize what  I  have  in  mind  in  regard  to  administration  in  a  sentence. 
If  the  administration  of  the  whole  project  of  expenditure  were 
placed  in  the  hands  of  a  Commission,  headed  by  Herbert  Hoover, 
I  think  we  could  all  safely  go  about  our  domestic  affairs  and  find 
nothing  but  satisfaction  as  we  read  the  report  of  the  work. 

Our  history  is  not  wholly  devoid  of  adventures  in  altruism. 
When,  after  the  Boxer  Uprising,  America  in  common  with  several 
European  nations  was,  somewhat  to  America's  embarrassment, 
awarded  an  indemnity  of  some  $20,000,000,  we  promptly  declared 
that  while  it  was  probably  just  that  China  should  pay  us  that 
mdemnity  we  did  not  propose  to  receive  it  for  our  own  enrichment. 
So  we  have  in  all  the  years  since  devoted  the  payments  on  account 
of  that  indemnity  to  the  education  of  Chinese  students  in  Ameri- 
can institutions.  The  result  of  that  magnanimous  act  was  to  give 
America  a  prestige  in  China  such  as  no  other  nation  enjoyed. 


ADDRESS  OF  MR,  FRANK  A.  VANDERLIP 


41 


That  prestige  would  have  been  translated  directly  into  commercial 
profits,  had  not  the  government  of  China  fallen  upon  such  evil 
days,  and  had  not  the  commercial  opening  of  China,  which  some 
day  will  be  a  certainty,  been  for  the  time  delayed. 

I  should  have  no  hesitation  in  arguing  the  merits  of  this  plan 
with  the  coldest  of  American  materialists.  All  I  would  ask  is  that 
such  a  man  have  imagination  enough  to  look  ahead  a  few  years 
for  results.  Never  was  there  a  greater  fallacy  than  to  say  there 
are  no  friendships  in  business.  The  very  warp  and  woof  of 
business  is  friendship,  confidence,  mutual  trust,  belief  in  honest 
and  not  too  selfish  purposes.  As  a  matter  of  fact,  I  believe  that 
if  we  were  to  look  selfishly  at  the  situation  over  a  period  of,  say, 
twenty  years,  there  is  no  proposal  in  regard  to  this  Allied  debt 
which  would  begin  to  give  America  the  material  results  that  such 
a  proposal  as  I  have  suggested  will  bring. 

To  the  mind  that  hesitates  over  such  a  project  as  this,  I  would 
like  to  put  a  question.  If  this  plan  is  not  acceptable,  what  plan 
then  would  you  propose?  To  insist  upon  the  payment,  and  fully 
to  accept  all  the  payment  that  we  could  force  our  debtors  to  make 
would  certainly  result  in  two  things.  In  the  first  place,  we  will 
get  very  little;  in  the  next  place,  we  will  create  a  general  European 
atmosphere  of  antagonism. 

The  debtor  never  loves  the  creditor.  If  the  debtor  is  seriously 
impoverished,  if  the  creditor  is  rich  and  powerful,  if  there  are 
circumstances  concerning  the  debt  which  permit  the  debtor  to 
argue,  to  his  own  satisfaction  at  least,  that  there  are  palliative 
circumstances  which  would  throw  doubt  on  the  full  validity  of 
the  debt,  the  relations  between  debtor  and  creditor  must  neces- 
sarily become  strained. 

Under  the  plan  here  proposed,  it  seems  to  me  that  the  sting  of 
our  insistence  would  be  taken  away  even  from  the  minds  of  those 
who  today  see  with  the  least  clearness  their  moral  obligation. 

If  we  convert  the  debt  due  us  into  a  debt  due  to  humanity  the 
whole  world  will  want  to  see  it  paid.  Each  national  neighbor  of 
our  debtors  will  be  even  more  insistent  than  we  that  the  obligation 


42 


THE  ECONOMIC  CLUB  OF  NEW  YORK 


ADDRESS  OF  MR.  FRANK  A.   VANDERLIP 


43 


be  discharged,  because  they  wUl  have  hopes  of  improving  their 
own  situations  with  the  aid  of  some  of  the  funds  so  realized. 
World  sentiment  would  be  favorable  to  this  debt  being  paid  if 
the  purposes  to  which  the  accounts  were  to  be  devoted  were 
clearly  seen  to  be  wise  and  sound  purposes  for  European  re- 
generation. 

We  need  not  make  an  irrevocable  decision  when  we  embark  on 
this  program.    For  a  good  many  years,  I  believe  it  would  be  wise 
for  us  to  devote  all  we  receive  to  such  purposes  as  I  have  sug- 
gested.   It  is  entirely  probable,  however,  that  there  would  come 
such  economic  restoration  that  in  the  end  a  considerable  part, 
conceivably  nearly  all,  of  the  principal   might  be  paid  to  us. 
Interest  money  that  we  loaned  and  reloaned  for  economic  de- 
velopment would  be  converted  from  the  original  obligation  of  the 
Allies  to  obligations  representing  material  properties  which  we 
created,  and  probably  backed  by  the  obligations  of  the  govern- 
ments of  those  countries  where  this  economic  development  took 
place.    The  time  might  come  when  we  would  cease  to  make  these 
sums  revolving  credits  for  European  economic  development    be- 
cause there  really  would  not  be  further  need  for  us  to  do  so. 
Then  the  money  would  come  back  to  us. 

I  am  firmly  convinced  that  in  the  great  catastrophe  the  War 
has  brought  there  has  been  created  an  opportunity  which  could 
never  otherwise  have  arisen.  The  obstacles  which  have  arisen  in 
the  path  of  European  civUization  can  be  turned  into  stepping- 
stones  leading  to  a  position  vastly  better  than  anything  Europe 
has  ever  known.  The  War  has  made  a  great  awakening  in  mil- 
lions of  dormant  minds.  It  is  possible  that  newly  awakened  im- 
pulses, if  they  can  only  be  harnessed  up  to  the  machinery  of 
production  and  distribution,  can  result  in  a  great  actual  improve- 
ment of  civilization.  That  awakening,  those  impulses,  are  now 
disconnected  from  any  machinery  of  commerce,  and  they  may  all 
be  lost  in  a  decaying  civilization.  We  can  help  turn  them  to 
account.    The  possibilities  that  there  are  in  society  for  realizing 


better  conditions  for  all  humanity  are  undreamed  of.  The  oppor- 
tunity has  arisen  to  make  those  possibilities  realities. 

If  we  insist  to  the  letter  upon  our  claim,  our  claim  will  in  all 
probability  never  be  met.  If  we  insist  upon  it  selfishly,  we  realize 
in  hatreds  but  not  in  cash.  If  we  are  generous,  and  wisely  gen- 
erous, those  claims  can  all  be  paid,  and  I  believe  will  all  be  paid, 
and  the  good  we  do  with  them  will  mean  more  to  us  materially 
than  anything  we  would  conceivably  be  parting  with. 

"For  whosoever  will  save  his  life  shall  lose  it;  but  whosoever 
shall  lose  his  life  for  My  sake  and  the  GospeVs,  the  same  shall 


save  %t. 


it 


''^l^ 


^ 


THE  TAXATION   PROBLEM 

OF  THE  UNITED  STATES 

Stated  in  a  series  of  questions  drafted  by  a  special  committee  of 
Tlie  National  E^conomic  League  and  voted  upon  by 

its  National  Council. 


1.  Should  tha  Income  Tax  b«  retained  as  one  of 
the  principal  sources  of  Federal  revenue? 

2.  Should  the  present  minima  of  taxable  income 
be  retained? 

If    jour   answer    is    no,    should    the    present 
minima  be 

(a)  Raised? 

(b)  Lowered? 

3.  Should  the  present  rates  of  surtax  upon 
incomes  in  excess  of  $5,000  be  retained? 

If  your  answer  is  no,  should  the  present  rates 
of  surtax  be 

(a)  Increased? 

(b)  Diminished? 

4.  Should  the  Excess  Profits  Tax  be  retained  as 
a  source  of  Federal  revenue? 

5.  Should  the  Federal  Estate  (commonly  called 
Inheritance)  Tax  be  retained? 

6.  Should  a  direct  tax  be  levied  by  the  United 
States  upon  the  site  value  of  land:  i.  •.,  the  portion 
of  the  value  of  land  due  to  the  presence  and  activ- 
ities  of  the  community  and  to  natural  advantages, 
mineral  deposits,  harbor  frontages  and  the  like? 

7.  If  your  answer  is  yes  to  the  preceding  ques- 
tion, should  the  Federal  Constitution  be  amended  so 
that  such  a  tax  could  be  levied  at  a  uniform  rate 
throughout  the  United  States,  instead  of  being  ap- 
portioned among  the  States  in  proportion  to  popu* 
lation  as  at  present  required? 

8.  Should  tha  policy  of  the  United  States  with 
respect  to  a  tariff  on  imports  be 

(a)  A  tariff  for  the  protection  of 
home  {ndustriet? 

(b)  A  tariff  for  revenue  only? 

(c)  Free  trade  (i.  e.,  no  tariff  what* 
ever) ? 

9.  Should  Congress  undertake  a  survey  of  the 
ultimate  effect  of  ▼arious  kinds  of  taxes  to  determine 

(a)  What  taxes  involve  adminis- 
trative expenses  disproportion- 
ate to  the  revenue  collected? 

(b)  What  taxes,  if  any,  directly  or 
indirectly  increase  the  cost  of 
living  by  an  amount  materially 
in  excess  of  the  revenue  col- 
lected? 

(c)  What  taxes,  if  any,  couULbe 
levied  that  would  directly  or 
indirectly  reduce  the  cost  of 
living? 

10.  Is  it  advisable  for  the  United  States  to  pay 
off  its  bonded  indebtedness  as  rapidly  as  the  bonds 
mature? 

11.  Should  the  Federal  power  of  taxation  be 
used  as  an  indirect  means  of  imposing  regulations  in 
behalf  of  the  public  health,  morals  or  safety  which 
Congress  would  have  no  power  to  impose  directly? 


Yei 

453 

237 


No 
46 

2^ 


60 
128 
182 

277 

17 
178 
130 

368 

362 

138 

162 

317 

117 


28 


260 

188 
84 

441 


51 


206 


154 


242 


300 


MADDIH'PARDKL   MI«» 
JAMAICA  rLAIR 


i 


■\ 


\ 

COLUMBIA  UNIVERSITY   LIBRARIES 

This  book  is  due  on  the  date  indicated  below,  or  at  the 
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the  Librarian  in  charge. 

DATE  BORROWED 

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DATE  DUE 

i 

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i 

i 

1 

C28< IO-S3)IOOM 

i         '^Sffl?l!l';lt''VERS,TY 


,V'B«AR/ES 


w 


D997.3 


V28 


997.3 
Vanderlip 


V28 


The  need  for  a  united  nation. 


\    . 


. 


^y^5«  Oil  IB 


NE 


m   m 


SEP  011994 


TWe- 


'*f*''***"n'>< 


MAR  11   1955 


END  OF 
TITLE 


